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Completing the IRS’s compliance survey is voluntary, but there may be value in it for all 501(c)(4), (5), (6) organizations.

IRS Questions Tax-Exempts About Finances and Activities

  • 4/9/2013

IRS Questions Tax-Exempts About Finances and Activities

The IRS is asking about 1,300 tax-exempt organizations, including many trade associations and social welfare/advocacy groups, to complete a survey about their revenue sources, spending, and political activities. The agency hopes to learn how well these groups are complying with the rules of tax exemption.

Completing Form 14449, Self-Declarers Questionnaire is voluntary, but there may be value in the exercise even for exempt organizations that have not received the IRS mailing or that choose not to formally participate.

“Although the instructions indicate that completion of the questionnaire is voluntary, we encourage organizations that have received it to answer all questions completely and accurately,” says Karen Gries, a tax partner in the public sector group. “Organizations not receiving the questionnaire may still want to download and complete the form as an exercise designed to identify risk areas and improve their compliance before the IRS comes knocking.”

Recipients choosing to respond have 60 days to complete the online form, with an additional 30 days granted if needed.

What’s behind the survey?

The questionnaire is the latest in a series of IRS inquiries to hit the exempt community. It focuses on key areas of interest to the IRS, including sources of revenue, unrelated business income, related party transactions, compensation, and political activities. Colleges and universities and health care organizations are among the exempt entities that previously received such surveys.

With this initiative, the IRS says it is looking at organizations that are not officially recognized as tax-exempt but are claiming tax exemption under section 501(c)(4), (5) or (6) of the Internal Revenue Code. Unlike 501(c)(3) charities, 501(c)(4), (5) or (6) organizations, known as “self-declarers,” are not required to apply for IRS tax-exempt status but may still benefit from tax exemption.

The IRS says responses to the questionnaire will help it learn more about the structure and operations of self-declared tax-exempt organizations and determine whether they are complying with applicable laws. The agency’s website indicates that an organization may choose not to participate in the survey, but that nonparticipants may be referred for an examination if they do not do so.

“We have also learned from past compliance check questionnaires that responses to the questions may initiate additional inquiries or examinations,” Gries says.

reference-only copy of the questionnaire can be downloaded as a worksheet before entering data online. If an organization has not received a PIN, password, and source ID in a letter from the IRS, it is not being asked to complete the survey.

How we can help

CliftonLarsonAllen can assist organizations with the online survey process, and can work with others to help assure compliance with tax laws.

Karen Gries, Public Sector Tax Partner or 703-825-2164