Form 990 Audit Triggers by Carolyn Flaherty

Each year the IRS announces its exempt organization work plan. Evaluation of the plan reveals exempt organization audit triggers. For 2013 the IRS will be scrutinizing entities with the following characteristics:

1. Organizations with high foreign expenditures.

2. Medium to large organizations that report substantial fundraising income but proportionally small fundraising expenses.

3. Entities that report high annual gross receipts but low compensation of directors, trustees, officers and key employees.

4. Organizations reporting considerable unrelated business income for three or more consecutive tax years with little or no related taxable income.

5. Exempt organizations that have potential impermissible campaign spending.

6. 501(c)(4), (c)(5) and (c)(6) filers including social welfare organizations; labor, agricultural and horticultural groups; and trade associations that have self-declared themselves tax-exempt without an IRS determination.

Because the IRS continues to use analytical evaluators of Form 990 responses to select organizations for audit and review: filers should take care to review and follow Form 990 instructions.

Refinancing Your Rental Property by Carolyn Flaherty

Mortgage interest rates have been trending downward for many years. As such, many people have taken the opportunity to re-finance their loans to ascertain shorter terms or lower monthly payments. Although you are only allowed to deduct qualified points and interest on your primary residence: you may be able to deduct more from a rental property you own.

The fees associated with the refinance are deducted over the term of the loan. However, if the refinance is done to take equity out of the property in order to make substantial improvements on the property; the fees may be deductible in the year they are paid.

Some of the settlement expenses that can be deducted include the following:

• Abstract fees
• Appraisal fees
• Attorney fees
• Bank fees
• Mortgage commissions
• Notary fees
• Points
• Recording fees
• Title search fees
• Underwriting fees

These amounts can be found on your closing statement and again, should be amortized over the life of your loan.

The remaining balance of charges from the previous loan that were being amortized may be deducted in full the year you refinance if you refinance with a new lender. On the other hand, if you refinance with the same lender, you should deduct your unamortized balance of old charges over the life of the new loan.