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Charity and Nonprofit Audits: Scope of Audits and Compliance Checks

Audits:

An audit may include a review of the following items:

  • Whether an organization timely filed all returns and forms as required under the law
  • Whether all returns and forms are complete and accurate
  • Whether an organization's activities are consistent with its stated tax-exempt purpose
  • Annual returns for the tax year under audit, and for prior and subsequent tax years
  • Employment tax returns
  • Form 1099 series information returns
  • Private foundation excise taxes
  • Intermediate sanctions excise taxes (Code section 4958)  
  • Excise tax and information returns (Forms 11-C, 730 and W-2G; for more information about gaming taxes and reporting, see Publication 3079)
  • Whether any tax liabilities were properly paid (e.g., employment taxes, unrelated business income tax)
  • Whether an organization complied with disclosure requirements for applications for exemption, for Form 990 series returns, and for fundraising solicitations and events.

Compliance Checks:

A compliance check may include review of the following items:

  • Whether an organization is adhering to recordkeeping and information reporting requirements
  • Whether an organization's activities are consistent with its stated tax-exempt purpose

A compliance check is a review of information and forms that IRS requires organizations to file or maintain - for example, Forms 990, 990-T, 940, 941, W-2, 1099, or W-4. The check is a tool to help educate organizations about their reporting requirements and to increase voluntary compliance. See Publication 4386, Compliance Checks--Examination, Audit or Compliance Check?

Please note: A compliance check is not an examination/audit; it does not directly relate to determining a tax liability for any particular period.

Compliance Check Questionnaires:

Compliance check questionnaires are a variation of compliance checks. The IRS mails compliance check questionnaires (or letters directing recipients how to complete the questionnaires on-line) to particular types of tax-exempt organizations to learn more about these types of organizations.  When the IRS receives responses, it generally reviews them to determine whether and how those organizations are complying with applicable tax-exempt law and then decides what, if any, further action is appropriate to be taken. The IRS generally prepares reports on its findings based on review of the questionnaire responses, and publishes these reports on IRS.gov.

 
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Page Last Reviewed or Updated: 18-Oct-2013