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ARTICLE · 02 JUNE 2005

Tax Client Alert - May 2005

Powell Goldstein LLP
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The IRS has begun its compensation audits for executives of nonprofit organizations. These "soft-contact" audit letters are being sent to 2,000 organizations. Organizations started receiving the letters in late March 2005. A copy of one of the letters has become public, and the questions that are listed in the letter are illustrative of the focus of the IRS in these ongoing audits.

United StatesTax
Michael I. Sanders
Michael I. Sanders
Susan Cobb
Susan Cobb
Nancy Kuhn
Nancy Kuhn

IRS Nonprofit Compensation Audits

The IRS has begun its compensation audits for executives of nonprofit organizations. These "soft-contact" audit letters are being sent to 2,000 organizations. Organizations started receiving the letters in late March 2005. A copy of one of the letters has become public, and the questions that are listed in the letter are illustrative of the focus of the IRS in these ongoing audits. The questions relate to the nonprofit’s compensation packages and whether they comply with IRS guidelines for establishing reasonable compensation for executives, board members, and other highly paid employees ("disqualified persons") for purposes of section 4958 for public charities and section 4941 for private foundations.

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