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There is a phrase in English which creates more fear and anxiety than any other: IRS Audit. Just hearing the words is enough to cause many people without fear of bursting into a cold sweat and shrinking terror. It 'bad enough when an individual has to do with IRS issues. But when it comes to a nonprofit organization, there are a lot of pain for all. Directors, employees, partners, donors … anyone can be affected. Moreover, only potential badadvertising is sufficient to cause a non-profit leaders to reach for the Rolaids.

As a non-profit in order to avoid IRS audits? It helps to understand certain situations and events that can trigger an audit. This article will consider five sources of checks and give advice on how to stay out of the cross of Uncle Sam.

1. Complaints. One of the most common causes of IRS examinations is a complaint by a third. These "informant" situationsmay or may not have any credibility to them. In general, if the IRS decides to examine the charges, which start as a compliance review. It is also possible for one of these exams to pass the status of a full audit, but are not … at least for organizations that operate completely above board.

But how to avoid this? Sure, anyone can make a complaint. But support is another thing. Unless the complaint contains credible (or,least credible) the substance is often overlooked by the IRS. To operate transparently and maintain good communication with the public goes a long way to minimize the risk of complaints.

2. IRS Form 990. Form 990 is the return of federal information filed annually by tax-exempt organizations. The purpose of Form 990 is to inform the IRS (and public) on a non-profit, finance, and governing structure. It is also agreater contribution to IRS audits. Why? Form 990 is intentionally designed to detect the degree of compliance with the regulations of the organization operates within. The best way to avoid controls Form 990-inspired is to work within the first, then make sure that it is preparing to return to know what they are doing. Unfortunately, most tax preparation are not experienced with the specificity of IRS tax-exemption. Find what it is.

3. Payroll taxyields. This is another example of storage of documents to come around to bite an organization. How? Errors and omissions are one-way. If the IRS sees strange things in the payroll tax returns, control is required. Another thing that the IRS looks at the consistency of information. Let's say you pay your nonprofit of its staff, independent contractors (usually not a good thing), but the payroll reports on Form 990 as salary . This type of mismatch is an open invitationFor questions. As for the form 990, it pays to get advice and assistance of experts.

4. public shenanigans. I guess you could say this is related to # 1 above (complaints), but it's different. This type of examination is practically required. A public audience in a manner contrary to federal regulations is simply to attract the IRS knocking. The current situation regarding the organization ACORN is a good example. While not yet been verified,is likely to come. Other examples of flagrant political campaign participation, the excessive remuneration of directors of the charity, and conflicts of interest. Although the IRS does not see it directly, these situations often lead to claims by third parties. Knowing the rules and stay within them. And if you search for a leader of the lime-light, or if you yourself, consider yourself warned.

5. controls (hex!). This class is what you can do less. Thisarrives. A few years ago, the IRS decided to examine executive pay nonprofit community. They left in 1000 to seek 501 (c) (3) organizations to assess the level of compliance of reasonable compensation. They set their goal on the organizations whose top leaders have a compensation of over $ 100,000. One of our client organizations come to be chosen. Not that he had done nothing to cause suspicion … simply met the criteria. Theaudit lasted about three weeks and was not only stressful for those involved, the organizational costs of employee time and precious resources. Fortunately, the IRS has found no major problems, but much energy was devoted to research.

Of course, there are other reasons for your nonprofit be verified, but this list represents some of the most common causes. In another article, we'll look at what to do if you get the dreaded notice that your organization is about to be examined.