Ensure Consistency Between Your Website and Your Form 990 To Avoid IRS Issues
A basic area of interest to the IRS are the programs your organization offers. Tax exempt status was granted, in large part, based on your programs detailed to the IRS. You should see if the program descriptions in Part III of your 990 are consistent with your website. If your website showcases programs that don’t show up on your tax form, or vice versa, questions develop as to the completeness and accuracy of your tax filing. If there is discussion online about your international or lobbying programs, but the appropriate lines are not completed in Part IX or the applicable schedule is not attached to the 990, this may generate concern.
Also, have you announced a new program on your website that is unlike any activity the organization has undertaken in the past? If so, the IRS may be looking for a disclosure of that new program in Part III and Schedule O. Since it must be disclosed, you need to be prepared to link that program with your mission (stated just above on page two) and to the exempt purpose the IRS believes you are operating under.
What else can your website tell the IRS that might generate questions on your 990? Does your website have an article about your great fundraising event, including a picture of the big raffle winner? On your staff list, is someone listed as a development officer? Did you describe the launching of a new fundraising campaign? There are many places this type of fundraising information might show up on a 990, including Part V (issue W-2G and disclosure of value of goods provided to attendees), Part VIII (special event and gaming revenue and expense); Part IX – for 501(c)(3) only – (fundraising expense allocations); and Schedule G, which details your special events and gaming activities.
What about that link to an online store that sells items unrelated to your mission, like clothing or decorative items? Do you have ads on your website or a tab with instructions on how to advertise in your journal or newsletter? The IRS may wonder if you have unrelated business income and should be filing a Form 990T. There is nothing wrong with doing this, but you should make sure you have records to support revenue and related expenses, whether or not it rises to the level of needing to file a form. Per the IRS instructions, it only takes $1,000 of unrelated revenue (not net income) to trigger the filing requirement, so they may get interested rather quickly.
Other things disclosed on your website have reporting implications on your 990. A quick list includes solicitation of auto donations, a description of bylaw changes, a discussion of your chapters, joint ventures, a spotlight on grant and scholarship winners, links to political candidate or lobbying websites and a list of related entities. These are all governance related areas which the IRS reviews as a way to gauge the transparency of your information return disclosures.
It is clear that many constituencies may be reviewing your website, which can be a minefield when it comes to watchdogs like the IRS and others. It pays to take a good look at your content to ensure that your tax reporting properly reflects the information that you put out to the public via the internet.
Please contact us if you would like more information on this topic in general or have questions specific to your organization.