What do I do if I receive a Notice of Deficiency from the IRS?

Question. What do I do if I receive a Notice of Deficiency from the IRS? Answer. You will get this letter if you owe additional tax or other amounts for the tax year(s) listed in the letter. The letter explains how to dispute the adjustments if you do not agree. If you want to dispute… [Read More]

How do I appeal an IRS Audit?

Question: How do I appeal and IRS Audit? Answer:  First, after you audit, the IRS sends an examination report with proposed adjustments to the taxpayer; these will also include additional penalties and interest. Assuming you don’t sign off and return a copy of the report within a few weeks, the IRS will usually send you… [Read More]

What is a Small Tax Case?

Question. What is a Small Tax Case? Answer. “Small tax cases” are handled under simpler, less formal procedures than regular cases. However, the Tax Court’s decision in a small tax case cannot be appealed to a Court of Appeals by the IRS or by the taxpayer(s). If you seek review of one of the four… [Read More]

What are “directly connected” expenses?

Question: What are “directly connected” expenses? Answer: Deductions incurred solely because of the unrelated business are known as directly connected expenses. These are expenses that wouldn’t be incurred if the unrelated business didn’t exist.  For example, the costs of maintaining a building that’s used solely for a gift shop (the unrelated business) could be a directly… [Read More]

When is Unrelated Business Income Taxable?

If your nonprofit engages in inactivity unrelated to its exempt purpose, you may have Unrelated Business Income that is taxable. Unrelated Business Income is the income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that… [Read More]