“IRS exams don’t happen terribly often, but when they do, they will change your life,” warned David Trimner, a principal in nonprofit tax with CliftonLarsonAllen, at the 2015 CLA National Association Conference. It was just one of the insights, cautions, and lessons captured in the video CLA Talks: IRS Examinations of Nonprofits — War Stories and Lessons Learned.
In this seven-minute clip from his full conference presentation, Trimner says there are predictable patterns to IRS exams, and that the IRS tends to look at the same types of issues in all of the examinations it conducts. He elaborates on a few of these risk areas, including executive compensation, independent contractors, the distinction between advertising and sponsorship acknowledgements, and the tax consequences of affinity contracts. It should be noted that The Trade Act, passed June 29, 2015, increased the penalties for some issues discussed in this video. It applies to information returns filed after December 31, 2015.
An IRS examination can drain time and resources, damage morale, and have an adverse effect on the public perception of any organization, Trimner says. He suggests the best way to prepare for an IRS audit is through day-to-day management, governance, and reporting practices.
White Paper: 10 Nonprofit Tax Issues to Address Before an IRS Audit of Form 990
Download now
David Trimner has provided specialized tax consulting and compliance services to hundreds of tax-exempt organizations. As a principal with CliftonLarsonAllen, he provides federal and state tax services to public charities, private foundations, trade associations, health care organizations, and higher education institutions.
View additional installments in the CLA Talks video series.