Tax Information And Guide

Tax Software A team of IRS examiners will move into the global headquarters of the Nature Conservancy in Arlington to begin auditing the charity, the world's largest environmental organization.

What, exactly, does the the IRS look for when processing tax returns and deciding on whether to audit a specific filing Essentially, all returns are examined, but as returns are processed, they go through a scoring methodology which will largely determine whether the return will ultimately be subject to a full audit, said Warren Simonsen, associate area chief counsel for the IRS' Small Enterprise division, at the Washington D.C. Bar Tax Section luncheon held on March 9, 2004. Those returns with high scores are surveyed to determine if an audit would be proper.

Software Tax A letter sent to the Conservancy by the Internal Revenue Service last month indicates that the audit will be of uncommon scope for a charity, tax specialists said. The memorandum proposes a preliminary meeting between four IRS examiners and the Conservancy's chief financial officer to discuss logistics, communications, telephone access, equipment and accommodations. The IRS will examine 2002 tax returns, the letter said.

Cryan added that the IRS also uses matching and related return exams to select returns for audit. Matching would most likely be used, noted Cryan, 1. In this situation, the IRS would simply review the return information to determine if the numbers "matched." Similarly, for related returns, the IRS could check a business entity return against the related employment tax return, for example, to make sure the information is reported consistently.

Every Landlord Tax Deduction "It is unusual," said former IRS commissioner Donald C. Alexander, now a private tax lawyer. "This is an extraordinary case. . . . It is an indication of a pretty strong audit."

You can attend an audit yourself, but you don't have to. You can authorize your accountant, lawyer, or other tax professional to handle it without you. Often this is the best way to prevent the audit from escalating beyond the original areas that attracted the IRS's interest. Experienced professional advisors are less likely to become emotional or to make statements that lead to more IRS questioning.

Tax Help Conservancy spokesman James R. Petterson said officials there have not been told the scope of the examination or its genesis. In a statement on the group's Web site, the Conservancy promised to cooperate fully and provide examiners with workspace, equipment and telephones "as needed."

is a partner in the business practice group of Whyte Hirschboeck Dudek S.C., where he concentrates in the areas of taxation and business law. Dan advises clients on strategic planning, federal and state tax issues, transactional matters, and employee benefits. He represents clients before the IRS and state taxing authorities concerning audits, tax controversies, and offers in compromise. He has served in various leadership roles in the American Bar Association and as Great Lakes Area liaison with the IRS. He can be reached at dsw@whdlaw.com.

Help Tax An IRS spokesman declined to comment. Alexander and other specialists said such an audit could take a year or longer.

Hopefully, this will not be an issue for you, but you should have some awareness of the IRS audit procedures. The IRS has several different levels of audits. If questions arise about your math, items seem to be omitted from your return, or your figures don' 2s, 1099s, or 1098s, the IRS may simply request a correction or explanation by mail. To explore this topic further, take a look at What To Expect if You Are Audited.

Ernst Ernst Guide Guide Tax "If they go into General Motors, this is what they do," said attorney Sheldon Cohen, a former chief counsel and commissioner of the IRS. "This is a major audit, of consequence."

Tax Return Live-in IRS auditors have become a fact of life at some Fortune 500 conglomerates but remain rare at nonprofit corporations, the specialists said. The charity has assets of more than $3 billion and ranks as the eighth largest nonprofit of any type in the nation.

Return Tax The developments follow articles in The Washington Post over the past year that examined financial irregularities and conflicts of interest at the Conservancy. One story described alleged IRS code violations at a Conservancy project in Virginia, and another disclosed a dozen loans that the Conservancy extended to its employees. A $1.5 million home loan went to Conservancy board member and President Steven J. McCormick, who repaid the debt after he was questioned about it by a reporter.

Guide Guide Master Master Tax The stories also reported that the Conservancy had repeatedly bought land, added some development restrictions, then resold the properties at reduced prices to its trustees and other supporters. The buyers made cash gifts to the Conservancy roughly equal to the difference in price, thereby qualifying for substantial tax deductions.

Tax Preparation In the wake of the stories, the Conservancy banned a range of practices, saying it would no longer lend money to insiders, sell land to trustees or drill for oil on nature preserve land. The charity is conducting a broad internal review of its management practices and says more changes are expected.

Preparation Tax The Senate Finance Committee began looking into the charity last year. Investigators have spent months sifting through internal Conservancy documents, debriefing whistle-blowers and weighing legislative reforms.

Employer Tax Guide The IRS letter says auditors will examine the Conservancy's fiscal 2002 tax return, which was filed on what is known as an IRS Form 990. Past Conservancy tax returns contained misstatements and omissions.

Tax Services For example, the Conservancy's 2001 tax return showed that the charity had lent the utility firm WEPCO, the Wisconsin Electric Power Co., $2.2 million. The lending was made in connection with a project aimed at protecting Central American forests and could have generated greenhouse-gas credits for the utility.

Services Tax Conservancy officials later said the WEPCO loans totaled only $1.5 million. The rest of the money went to corporations whose names were mistakenly omitted from the filing, Conservancy Vice President Michael J. Coda said.

Master Tax Guide "That has no relation to reality," Coda said of the IRS Form 990 filing, during a June 2002 interview in which he acknowledged the errors.

Tax Attorney Months later, the Conservancy filed its 2002 tax return -- which again showed that the loans to WEPCO totaled $2.2 million.

Attorney Tax A specialist in nonprofit corporations who reviewed the Conservancy's tax returns described them as confounding.

Guide Law Tax "It stunned me," said the specialist, Peter Dobkin Hall, of Harvard University's Hauser Center for Nonprofit Organizations. "It's not exactly what I'd call a transparent organization.

Tax Accountant "I find that very peculiar. I couldn't find out a damn thing about them. It was a brick wall."

Accountant Tax Internal Conservancy documents show that the organization's auditor has complained about problems that could lead to IRS scrutiny or, in the words of one memo, to "the possibility of public exposure."

Circular Employer Tax Guide One internal audit report on a Conservancy project known as the Virginia Coast Reserve -- or VCR -- found numerous irregularities. Many financial transactions were improperly recorded, according to the March 2002 report, which is stamped "Confidential." The IRS was not told for years that the charity provided some employees with free housing and use of a car, lapses the report described as IRS violations.

Income Tax One Conservancy contractor, identified in the report as a Virginia farmer, received payments though his wife, the report said.

Us Master Tax Guide "VCR negotiated [an employment contract] in the farmer's wife's name and issued an IRS Form 1099 [which reports miscellaneous income to the IRS] in her name and social number even though her husband performed all of the work under the contract," the report said. "VCR management wrote the contract in the wife's name so that the farmer could hide personal income."

Property Tax By Joe Stephens and David B. Ottaway
Washington Post - 1/17/2004

Topic: Activism

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