January 9, 2003 | Read Time: 1 minute
The Internal Revenue Service has provided its auditors with a list of questions to ask selected religious and social-services groups this year as part of an ongoing effort to determine how the agency can best strengthen its auditing program.
The revenue service says it will use the answers to build “profiles” of religious and social-services groups that auditors can use to help identify areas in which each type of group would be most likely to violate tax laws. By determining characteristics shared by groups that comply with tax laws, as well as characteristics of groups that do not, the agency hopes to improve its efforts to ensure that all groups comply with the law.
Religious and social-services groups are among the first “market segments” the IRS will study. It has divided the nonprofit world into 35 separate categories, which it will survey to build a profile of each type of group. Churches, which are not required to file informational returns with the IRS, are not included in the category of religious groups.
Examiners will use the list of questions as they audit 90 to 120 groups in each category.
Among the information auditors will compile about each group: whether the group is still active, and if not, how it was dissolved; its size, purpose, and the number of people it serves; and its organizational structure, including whether it is related to another organization.
The auditors will pay special attention to whether the organizations they examine have made certain errors on their tax returns, including incorrectly identifying fund-raising income and expenses or overpaying directors. The auditors will also look at areas where charities can be confused by IRS rules in such categories as lobbying and conducting games of chance.
