For Charities’ Form 990, Final Destination Is an IRS Warehouse in Utah

Hundreds of thousands of federal informational tax returns line the shelves of the Internal Revenue Service’s warehouse here near the shore of the Great Salt Lake, just south of Ogden.

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Since last year, charities and foundations from every state in the union have mailed their Forms 990, 990-EZ, and 990-PF to just one place: the Ogden I.R.S. Center. There, the returns are processed and eventually shipped to the Clearfield warehouse — which served as a Navy supply depot during World War II — for storage.

That is a big change from the past, when non-profit groups sent their forms to seven different places, depending on the state where their headquarters were located. The government decided to move all the processing to Ogden in large part to make federal monitoring of non-profit groups more effective than it has been in the past.

“If you have the forms coming in at different places around the country, with employees who at best can spend only one-tenth of their time on 990s, you never know if you have consistent filing processes in place, if you are getting all the forms, and if you are catching all the problems with the way they are filled out,” says Marc Owens, director of the I.R.S.’s Exempt Organizations Division, in Washington. Before the Ogden center took over, he says, the informational forms “were always at best a stepchild, if they were noticed at all.”

The government also figured that moving the forms to Utah would help the public get access to returns more quickly.

Because all of the forms are in one place, the I.R.S. has an easier time making photocopies of returns that are requested by donors, journalists, and others. What’s more, the agency’s Ogden workers have begun to scan all charity and foundation Form 990s into computers; in coming months the government will make the electronic images available on CD-ROM’s for purchase by libraries, watchdog groups, and anyone else — perhaps for as little as $150 or $200.

The changes in processing the forms could help the I.R.S. eventually make the returns available on its own Web site, Mr. Owens says.

Each day, informational tax returns filed by non-profit organizations stream into the Ogden Service Center. More than 600,000 are expected this year. Tax-exempt groups with annual gross receipts of $25,000 or less do not have to file annual returns, nor do churches.

About 300 of the center’s 3,400 year-round workers are assigned to handle the returns. The employees log the forms into an “inventory reporting system,” and forward the returns to people who check for the accuracy and completeness of the information provided.

Among the common errors that crop up on Forms 990: the failure to complete Schedule A, which asks for salaries and benefits provided to top officials, and the failure to include the signature of the appropriate officer.

After problems are resolved — sometimes after the I.R.S. has talked over its concerns with the groups involved — the tax forms are given a number to identify the type of return and are forwarded to the transcription department, where selected information — such as contributions received, overhead costs, and expenditures on charity programs — is keypunched into a computer. (The data eventually wind up at the I.R.S.’s national computer in Martinsburg, W.Va., so that the government can crunch the numbers to determine trends.) Any returns that still have problems are sent back to the “error resolution area” for another look and the necessary corrections.

The I.R.S. is allowed under federal law to fine organizations that fail to file complete or timely returns unless the groups can prove that they had a good reason for making the error. Mr. Owens says that the service cannot say exactly how many times it has levied such penalties against tax-exempt organizations or how much money it has collected. But he says that as many as 90 per cent of the fines that the government initially levies are eventually dropped because the groups can offer good explanations. Besides, he says, the I.R.S. is uncomfortable punishing organizations that don’t owe tax and don’t have lawyers and accountants to give them professional help and advice.

“There’s so many small organizations, run by volunteers, that get new officers each year who aren’t told by the previous ones what they need to do,” says Margie White, a section chief who works with non-profit and business returns at the Ogden service center. “The new ones might just take last year’s return and plug in new figures without understanding what they’re doing and the tax law behind it.”

Once returns clear the computer system, the Ogden center sends them by truck to the Clearfield warehouse for storage. From there, the service mails the forms to I.R.S. agents who need the returns for audits.

Workers also make photocopies of forms for citizens, who may obtain copies of as many as 200 organizational returns per person per year.

The government charges $1 for the first page and 15 cents for each additional page, and it tries to ship the copies within 45 days. People requesting copies of a return must provide the organization’s name and full address, including zip code, and, if possible, its employer identification number.

I.R.S. employees who navigate the rows and rows of stored tax returns say they can almost always expect a burst of requests when a charity scandal is made public.

“We can watch the news at night and know what return everybody is going to want — the hot item of the day,” says Marsha Fowers, a management analyst at the Ogden center.

The Clearfield warehouse keeps all filed forms for two years before forwarding them to the National Archives and Records Administration in Denver. The Colorado facility holds on to the returns for another four years and then destroys them.

The big changes at the I.R.S.’s Utah facilities, says Mr. Owens, are certain to help raise the visibility of the federal informational returns, which in turn helps the revenue service keep track of both good and bad apples.

Mr. Owens told a recent gathering of charity lawyers in Washington that the government each year can audit only 10,000 to 12,000 tax-exempt organizations and needs all the outside “eyes” it can get.

“The person looking at your 990 is going to be your neighbor, it’s going to be the local newspaper looking to fill up space in the headlines with the compensation schedule on your Form 990, it’s going to be a major donor, it’s going to be somebody working on their estate plan,” Mr. Owens said. “And they’ll want to know what you do with your money. Is it really being used for good works, or is it being used for something else?”