How Often Does the IRS Audit Charities?
The frequency of IRS audits of charities is relatively low compared to other sectors. Generally, the IRS audits less than 1% of all tax-exempt organizations each year. This includes charities classified under 501(c)(3) and other non-profit sections. Factors that might increase the likelihood of an audit include:
- High Revenue: Charities that report substantial income are more likely to attract IRS scrutiny.
- Frequent Changes: Organizations that frequently change their structure, operations, or leadership may raise red flags.
- Unusual Deductions: Large or unusual deductions that seem disproportionate to the charity's stated mission can trigger an audit.
While the IRS has limited resources, they prioritize audits based on various risk factors. Charities that operate transparently and comply with tax regulations are less likely to face audits. It is essential for charities to maintain proper documentation and adhere to tax laws to minimize the risk of an audit.
In summary, while audits do occur, they are not common for most charities unless specific risk criteria are met. Regular compliance and governance practices can help organizations maintain their tax-exempt status and reduce the likelihood of an audit.