Tax-exempt organizations - the IRS wants you to think about record retention policies

Commenting on tax forms, Albert Einstein once said, "This is too difficult for a mathematician. It takes a philosopher."

Einstein might appreciate the latest changes in filing for tax-exempt organizations. In an attempt to foster transparency and ease the filing organization's administrative burden, the IRS recently redesigned the Form 990 (the annual information return that most tax-exempt organizations are required to file). The redesign asks a variety of questions regarding the filing organization's governance, including the question, "Does the organization have a written document retention and destruction policy?"

Although a portion of the new governance section "asks [for] information about policies and practices that are not required by federal law," the Sarbanes Oxley Act imposes criminal liability on organizations, including tax-exempt organizations, that destroy records with the intent to obstruct a federal investigation. Many tax-exempt organizations have responded to the Sarbanes Oxley Act by adopting and implementing record retention policies. The IRS recommended that organizations  "review[...] the new governance questions, which generally must be answered based on policies and practices in place on or before the last day of the 2008 tax year."

If your organization must check the "no" box for 2008 , consider implementing a policy for the 2009 tax year. Whether your organization deals with mathematicians, philosophers or neither, it's good business practice for your tax-exempt organization.

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Comments (1) Read through and enter the discussion with the form at the end
Peterk - March 26, 2009 8:46 PM

It would be nice if everyone would drop the use of the term "document retention". It is records retention. ISO 15489 defines a document as "recorded information or object that can be treated as a unit." at the same time they define a record as "information created, received, and maintained as evidence and information by an organization or person, in pursuance of legal obligations or in the transaction of business."

so using the above definitions what the IRS is really concerned about is not a document retention policy, but a records retention policy.

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