Posted on May 6, 2015

The IRS will begin selecting which 501c3 organizations to audit based on computer scans of Form 990 returns. Elaine Leichter, a tax law specialist in the IRS Tax-Exempt and Government Entities Division, recently announced that the IRS will set up computer queries to identify inconsistencies and missing information in Form 990 returns. She emphasized the need for organizations to fill out the form as completely as possible.

The IRS is also focusing on certain issues as it selects organizations to audit, including protecting charitable assets, the tax gap (the amount of taxes that are not paid on time), and international activities. The IRS is particularly focused on issues that have the potential to create unrelated business taxable income for organizations, expose them to excise taxes, or even endanger their tax-exempt status. The IRS is no longer focusing its audits only on certain types of 501c3s, such as hospitals and universities, but will instead address the issues above based on data analysis of the Form 990.

As your organization files its Form 990 (for many organizations, the form is due on May 15), you should make sure to provide all necessary responses on the Form 990 and to provide consistent responses on all of the required Parts and Schedules.