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Charity and Nonprofit Audits: Exempt Organizations Examinations

Exempt Organizations (EO) is a business unit within Tax Exempt and Government Entities at the IRS. Under the umbrella of Exempt Organizations and headquartered in Dallas, Texas, EO Examinations monitors whether charities and other non-profit organizations are operating in accordance with federal tax law. EO Examinations offices are located in all IRS regions.

To maintain tax exemption, charities and other non-profit organizations agree to play by a set of rules. They operate in a manner consistent with the reasons tax exemption is granted. They report their finances and activities to the IRS each year (e.g., a 990 series return or notice) if required to do so. They promise not to use their money or assets for the private benefit of those in charge of the organization. Section 501(c)(3) organizations avoid participating or intervening in the political campaigns of candidates for public office.

The bottom line is that the tax exemption system runs on trust. As the saying goes, Trust, but verify. It is the role of EO Examinations to verify.

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Page Last Reviewed or Updated: 18-Sep-2014