Compliant or Not Compliant

Mirror mirror, on the wall, which is the most compliant tax-exempt organization of them all?
While many tax-exempt organizations can operate differently from one another, there are still basic guidelines of governance that you should implement within your organization. A recent study from the IRS shows that there are a number of governance guidelines that link directly to how tax compliant your organization is.

How the Study was Conducted
The IRS uses a check sheet to obtain data about governance practices and related internal functions of 501(c)(3) organizations. Basically, the check sheet asks about

  • Mission statements
  • Control of the organization
  • Policies on conflicts of interest
  • Policies on the proper use of assets
  • The use of comparability data when determining compensation
  • Whether your organization’s Form 990 was reviewed by the board or a designated committee 
  • Any family or outside business relationships between board members, officers, trustees, or key employees

The check sheet and other examination materials for governance and tax-exempt organizations can be found HERE.

Study Results
Within the study, the IRS reportedly found relationships between some questions and compliance or noncompliance that were statistically valid. Based on the significant correlation between questions related to some governance practices and tax compliance, your organization is “more likely to be compliant” if you:

  • Have written mission statements
  • Use comparability data when making compensation decisions
  • Have procedures in place for the proper use of charitable assets
  • Have your Form 990 reviewed by the entire board of directors

Surprisingly, or not so much depending on how you see it, organizations deemed “less likely to be compliant” were those in which central control was place on just one person or a small, selective group of people. There were also responses that led to no correlation at all like

  • Conflicts of interest
  • Never or occasionally using comparability data
  • Family or outside business relationships between board members, officers, trustees, or key employees

The study was based on tax-exempt charities that were already selected for examination and the IRS has stated that future studies would be done with random samples.

So, to be the “fairest,” or, in this case, the most compliant in the land, you now have idea as to where to start or what functions within your organization contribute to your tax compliance overall. At the very least, stay compliant with e-filing your tax-exempt return on time with Express990. We support all three 990 forms for tax-exempt organizations. If you’re constantly on the move, download our FREE Express990 App for iOS and Android tablets, or use our mobile site to e-file a Form 990-N (e-Postcard).

For assistance with e-filing your tax-exempt return, contact us at our headquarters located in the quaint town of Rock Hill, South Carolina. We’re available by phone Monday through Friday from 9am to 6pm EST at (704) 839-2321, by email at, and by live chat at

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