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TrimnerBeckham, PLLC, 1750 Tysons Boulevard, Suite 1500, McLean, VA (2026)

04/23/2026

Nonprofit Tax Risk & Strategy Series (Part 4): Related Party Transactions: How to Structure Them Properly

Transactions involving insiders are a common and necessary part of operating a nonprofit organization.
However, they are also one of the most closely reviewed areas by the IRS.
These transactions are not prohibited—but they must be properly structured, approved, documented, and disclosed to avoid compliance risk.

📊 What Is a Related Party Transaction?
A related party transaction generally involves an individual or entity that has a close relationship with the organization.
This may include:
• Officers and directors
• Key employees
• Family members of insiders
• Businesses owned or controlled by insiders
These relationships are disclosed on Form 990, including Schedule L, and may also affect other sections of the return.

🔹 Why the IRS Focuses on These Transactions
The IRS reviews related party transactions to ensure that the organization is not providing improper private benefit.
Even when transactions are legitimate, the IRS evaluates whether they:
• Are conducted at fair market value
• Serve the best interest of the organization
• Are approved through an independent process
• Are fully disclosed
In many cases, the issue is not the transaction itself—but the lack of transparency or documentation.

🔹 Common Areas of Risk
Business Transactions with Insiders
Payments to companies owned or controlled by insiders are common—but highly scrutinized.
Examples include:
• Consulting or advisory services
• Vendor contracts
• Professional services
These arrangements must be at arm’s length and supported by appropriate documentation.

Loans to or from Insiders
Loans involving insiders can raise concerns, particularly if:
• Terms are not clearly documented
• Interest rates are below market
• Repayment terms are unclear
All loan arrangements should be formalized and consistently applied.

Leases and Property Arrangements
Leasing office space, equipment, or other assets from insiders must reflect fair market value.
Informal arrangements or preferential terms can create compliance risk.

Transactions Involving Family Members
Transactions with family members of insiders are also subject to scrutiny.
These relationships may not always be obvious but must be identified and evaluated for disclosure purposes.

Incomplete or Missing Disclosures
One of the most common issues is failing to properly disclose related party transactions on Form 990.
This includes:
• Omitting transactions from Schedule L
• Providing incomplete information
• Inconsistent reporting across the return
Because Form 990 is publicly available, incomplete disclosures can raise questions even when transactions are appropriate.

📌 The Most Common Issue: Lack of Structure
Many organizations do not have a formal process for identifying and managing related party transactions.
As a result:
• Transactions may not be flagged early
• Documentation may be incomplete
• Disclosures may be inconsistent
The issue is often not the transaction itself—but the absence of a clear process and oversight.

📊 How to Structure Related Party Transactions Properly
Organizations can reduce risk by implementing structured procedures:
• Identify related parties in advance through conflict of interest disclosures
• Ensure transactions are evaluated at fair market value
• Obtain approval from disinterested board members
• Document how terms were determined (including comparability data)
• Ensure accurate and complete disclosure on Form 990
A proactive approach is key.

📊 Why This Matters
Related party transactions are visible not only to the IRS, but also to:
• Donors and grantors
• Regulators
• Charity watchdog organizations
Improperly structured or disclosed transactions can lead to:
• Increased IRS scrutiny
• Questions about governance practices
• Potential excise taxes in certain cases
• Reputational risk

📌 Final Thought
Related party transactions are not inherently problematic—but they are highly visible and closely reviewed.
When structured, documented, and disclosed properly, they can be managed effectively without creating compliance risk.
The key is not avoiding these transactions—but handling them with transparency and oversight.

🔜 In Part 5, we’ll focus on:
Governance & internal controls—and what your Form 990 reveals about your organization

04/21/2026

Nonprofit Tax Risk & Strategy Series (Part 3): Compensation & Private Benefit: What the IRS Really Looks For

Compensation is one of the most sensitive areas of nonprofit tax compliance—and one of the most frequently reviewed by the IRS.
While nonprofit organizations are permitted to compensate their leaders and staff, that compensation must be reasonable, properly structured, and well-documented.
When it is not, it can raise concerns about private benefit and excess benefit transactions, both of which carry significant compliance risk.

📊 The Core Principle: No Private Benefit
Tax-exempt organizations must operate for a public purpose—not private interests.
This means that no part of the organization’s net earnings can improperly benefit insiders, including:
• Officers
• Directors
• Key employees
• Individuals with substantial influence
This concept is commonly referred to as private inurement.
Even unintentional violations can trigger IRS scrutiny.

🔹 What the IRS Evaluates
The IRS looks beyond the amount of compensation and evaluates whether it is:
• Reasonable for the services provided
• Determined through an independent process
• Supported by appropriate documentation
Compensation includes more than salary. It may also involve:
• Bonuses
• Deferred compensation
• Fringe benefits
• Use of organizational assets
All forms of compensation must be considered together.

🔹 Common Areas of Risk
Excessive Compensation
Compensation that exceeds what would be paid for similar services in comparable organizations may be treated as an excess benefit transaction.
This can result in excise taxes and corrective actions.

Lack of Independent Approval
Compensation decisions should be made by individuals who are independent and free of conflicts of interest.
When insiders participate in setting their own compensation, it raises concerns about objectivity.

Limited or No Documentation
Even reasonable compensation can create risk if there is no documentation to support it.
The IRS expects to see:
• Board or committee approval
• Use of comparability data
• Written records of the decision

Unreported Benefits
Compensation is not limited to salary.
It may include:
• Housing allowances
• Expense reimbursements
• Personal use of organizational assets
Failure to properly report these benefits can lead to incomplete disclosures on Form 990.

Informal Arrangements
Handshake agreements or informal arrangements can create significant risk.
All compensation and benefit arrangements should be:
• Clearly defined
• Properly documented
• Reviewed periodically

📌 The Most Important Concept: Process Matters
One of the most important concepts in this area is the rebuttable presumption of reasonableness.
An organization can strengthen its position by demonstrating that compensation was approved through a structured process that includes:
• Independent decision-makers
• Use of appropriate comparability data
• Contemporaneous documentation
The IRS evaluates not only the outcome, but also how the decision was made.

📊 Why This Matters
Issues related to compensation and private benefit can lead to:
• Excise taxes on excess benefit transactions
• Required correction of payments
• Increased IRS scrutiny
• Reputational risk
Because compensation is disclosed on Form 990, it is also subject to public review.

📊 A Practical Approach
Organizations can reduce risk by:
• Establishing formal compensation review procedures
• Using independent data to benchmark compensation
• Ensuring decisions are made by disinterested board members
• Documenting all approvals and supporting data
• Reviewing compensation arrangements regularly
A structured and well-documented process is essential.

📌 Final Thought
Compensation is not just about how much is paid—it is about how decisions are made.
Even well-intentioned arrangements can create risk if they are not properly structured, documented, and disclosed.
A thoughtful, well-documented approach helps protect both the organization and its mission.

🔜 In Part 4, we’ll explore another area of IRS focus:
Related party transactions—and how to structure them properly.

04/16/2026

Nonprofit Tax Risk & Strategy Series (Part 2): UBI vs. Mission Income: Where Nonprofits Get It Wrong

One of the most misunderstood areas of nonprofit taxation is the distinction between mission-related income and unrelated business income (UBI).
Many organizations assume that all revenue they generate is tax-exempt.
That is not always the case.
Even organizations with a clear charitable mission can generate taxable income if certain activities are not properly structured or evaluated.
Understanding this distinction is critical to maintaining compliance and avoiding unexpected tax exposure.

📊 What Is Unrelated Business Income?
Unrelated business income generally arises from a trade or business that is:
1. Regularly carried on, and
2. Not substantially related to the organization’s exempt purpose
All three elements must be present for income to be considered UBI.
The key question is not whether the activity generates revenue—but whether it furthers the organization’s mission.

🔹 Where Organizations Often Get It Wrong
Assuming All Revenue Is Tax-Exempt
Many nonprofits believe that because they are tax-exempt, all income is tax-exempt.
However, tax-exempt status applies to the organization’s purpose—not all of its activities.
Revenue that does not further the mission may be subject to tax.

Misunderstanding Sponsorship vs. Advertising
One of the most common areas of confusion is the difference between:
• Qualified sponsorship payments (generally not taxable)
• Advertising income (often taxable)
If a sponsor receives substantial return benefits—such as promotional services, endorsements, or advertising—the income may be treated as UBI.

Fee-for-Service Activities
Providing services for a fee can create UBI if the activity is not substantially related to the organization’s exempt purpose.
For example:
• Selling services to the general public
• Operating programs that resemble commercial businesses
The analysis depends on how closely the activity aligns with the mission.

Use of Organizational Assets
Income generated from assets—such as rental income or intellectual property—may or may not be taxable depending on the structure of the arrangement.
Certain exclusions may apply, but not all income is automatically exempt.

Ignoring “Regularly Carried On”
An activity must be regularly carried on to be considered UBI.
Occasional or infrequent activities may not trigger UBI, while ongoing or continuous activities are more likely to be treated as a trade or business.

📌 The Most Common Issue: Lack of Analysis
Many organizations do not formally evaluate their revenue streams.
As a result:
• Activities are not classified properly
• Potential UBI is not identified
• Required filings may be missed
UBI is often not discovered until the organization is preparing its tax return—or worse, during an audit.

📊 Why This Matters
If an organization has unrelated business income, it may be required to file Form 990-T and pay tax on that income.
More importantly, excessive unrelated activities may raise questions about whether the organization is operating primarily for its exempt purpose.

📊 A Practical Approach
Organizations can reduce risk by:
• Reviewing revenue streams annually
• Evaluating whether activities further the exempt purpose
• Distinguishing between sponsorship and advertising
• Monitoring activities that are regularly carried on
• Consulting advisors when new revenue streams are introduced
Proactive analysis helps ensure that income is properly classified and reported.

📌 Final Thought
Not all revenue is created equal.
Two organizations may generate the same income—but the tax treatment can differ significantly depending on how the activity is structured and how it relates to the organization’s mission.
Understanding the distinction between mission income and unrelated business income is essential to maintaining compliance and protecting tax-exempt status.

🔜 In Part 3, we’ll explore another key area of IRS focus:
Compensation and private benefit—and what the IRS really looks for.

04/14/2026

Nonprofit Tax Risk & Strategy Series (Part 1): Are You at Risk? The Hidden Tax Risks Nonprofits Overlook

Many nonprofit organizations believe they are compliant because they file their annual Form 990 on time.
But compliance goes far beyond filing.
In practice, most IRS issues arise not from missed deadlines—but from misunderstood rules, incomplete processes, and undocumented decisions.
The reality is that many organizations are exposed to risk without realizing it.

📊 Compliance vs. Risk
Filing your Form 990 is only one part of compliance.
The IRS evaluates whether an organization is:
• Operating in furtherance of its exempt purpose
• Avoiding private benefit
• Maintaining proper governance and oversight
• Reporting activities accurately and consistently
An organization can file on time—and still face significant compliance risks.

🔹 Common Hidden Risks
Unrelated Business Activities
Many organizations generate revenue through activities that may not be substantially related to their mission.
Examples include:
• Advertising income
• Sponsorship arrangements
• Fee-for-service programs
Not all revenue is treated the same for tax purposes.

Compensation and Private Benefit
Payments to officers, directors, or related parties must be reasonable and properly documented.
Even well-intentioned arrangements can raise concerns if:
• Compensation is not benchmarked
• Decisions are not independently approved
• Documentation is limited

Related Party Transactions
Transactions involving insiders are not prohibited—but they are closely scrutinized.
These transactions must be:
• At fair market value
• Properly approved
• Fully disclosed on Form 990

Governance and Oversight
The IRS uses Form 990 to evaluate governance practices, including:
• Board independence
• Conflict of interest policies
• Documentation of decisions
Weak governance structures can signal broader compliance issues.

Filing and Reporting Gaps
Beyond Form 990, nonprofits have additional filing obligations, including:
• Form 990-T for unrelated business income
• Payroll tax filings
• Information returns such as Forms 1099
Missing or incomplete filings may indicate systemic issues.

📌 The Most Common Issue: Lack of Structure
Many organizations do not have a formal compliance framework.
As a result:
• Responsibilities are unclear
• Processes are inconsistent
• Documentation is incomplete
This often leads to reactive compliance—addressing issues only when they arise.

📊 A Practical Perspective
Strong organizations treat compliance as an ongoing process—not a once-a-year requirement.
This includes:
• Regular review of activities and revenue streams
• Clear governance and approval processes
• Proper documentation of key decisions
• Coordination between leadership, finance, and advisors

📌 Why This Matters
Compliance risks can lead to:
• IRS inquiries or audits
• Financial penalties
• Reputational concerns
• Potential loss of tax-exempt status
Many of these risks are preventable with proper structure and oversight.

📌 Final Thought
Most nonprofit risks are not obvious.
They arise from everyday decisions—how revenue is earned, how compensation is set, and how transactions are structured.
Understanding these risks is the first step toward protecting your organization and its mission.

🔜 In Part 2, we’ll take a closer look at one of the most misunderstood areas of nonprofit taxation:
Unrelated Business Income (UBI) vs. mission-related revenue

04/09/2026

IRS Audit Triggers for Nonprofits (Part 6): Filing & Compliance Failures That Create Risk

Timely and accurate filing is a fundamental requirement for maintaining tax-exempt status.
While many organizations focus on operations and mission delivery, filing and compliance failures are among the most common—and avoidable—reasons nonprofits face IRS scrutiny.
Understanding these risks is essential to protecting your organization’s exempt status.

📊 Why Filing Compliance Matters
Tax-exempt organizations are required to file an annual information return, typically Form 990, 990-EZ, or 990-N.
These filings allow the IRS to:
• Monitor compliance with tax-exempt requirements
• Review financial activity and governance practices
• Identify potential areas of concern
Failure to file or filing inaccurate returns can lead to significant consequences.

🔹 Common Audit Triggers
Late or Missed Filings
One of the most common issues is failing to file on time.
⚠️ Nonprofits that fail to file for three consecutive years automatically lose their tax-exempt status.
Even a single late filing may raise concerns, particularly if it becomes a pattern.

Filing the Wrong Form
Nonprofits must file the correct version of Form 990 based on their gross receipts and total assets.
Filing the wrong form can result in:
• Incomplete reporting
• Incorrect disclosures
• Increased risk of IRS follow-up

Incomplete or Inaccurate Returns
Errors or omissions on Form 990 can raise red flags, including:
• Missing schedules
• Inconsistent financial information
• Incorrect responses to governance questions
⚠️ The IRS reviews returns for both completeness and consistency.

Failure to Report Unrelated Business Income (UBI)
Organizations with unrelated business activities must report income on Form 990-T.
Failure to report UBI may result in:
• Underreported taxable income
• Additional tax and penalties
• Increased audit risk

Failure to Issue Required Filings and Forms
Nonprofits have additional filing responsibilities beyond Form 990, including:
• Form 1099 reporting for contractors
• Payroll tax filings (Forms 941, W-2, etc.)
• State filings and registrations
⚠️ Missing these filings can signal broader compliance issues.

Lack of Internal Filing Controls
Many compliance failures occur because organizations lack structured processes.
Common issues include:
• No calendar or tracking system for deadlines
• Unclear responsibility for filings
• Limited oversight or review

📌 The Most Common Issue: Reactive vs. Proactive Compliance
Many nonprofits approach compliance reactively—filing returns only when deadlines approach.
This often leads to:
• Last-minute preparation
• Missing information
• Increased risk of errors
A proactive approach to compliance helps ensure accuracy and consistency.

📊 A Practical Approach
Organizations can reduce filing and compliance risk by:
• Maintaining a compliance calendar with key deadlines
• Assigning clear responsibility for filings
• Reviewing filings before submission
• Tracking all required federal and state filings
• Coordinating between finance, leadership, and advisors
Consistency and planning are key to effective compliance.

📌 Why This Matters
Filing and compliance failures can result in:
• Automatic revocation of tax-exempt status
• Penalties and interest
• Increased IRS scrutiny
• Reputational risk with donors and stakeholders
Because Form 990 is publicly available, errors or late filings may also impact public perception.

📌 Final Thought
Filing compliance is not just an administrative requirement—it is essential to maintaining an organization’s tax-exempt status.
By implementing structured processes and maintaining accurate records, organizations can reduce risk and focus on their mission with confidence.

🔚 Series Wrap-Up
Throughout this series, we’ve covered key areas the IRS reviews during nonprofit audits:
• Unrelated business income (UBI)
• Compensation and private benefit
• Related party transactions
• Governance and internal controls
• Filing and compliance practices
Each of these areas plays a role in demonstrating that an organization is operating in compliance with its exempt purpose.

04/07/2026

IRS Audit Triggers for Nonprofits (Part 5): Governance & Internal Controls That Signal Risk

Strong governance and internal controls are critical for nonprofit organizations—not just for operations, but also for IRS compliance.
While the Internal Revenue Code does not mandate specific governance structures, the IRS uses Form 990 to evaluate how organizations are managed, controlled, and overseen.
Weak governance practices or lack of internal controls can raise concerns, even when financial reporting appears accurate.

📊 Why the IRS Focuses on Governance
The IRS views governance as an indicator of whether an organization is operating in a manner consistent with its tax-exempt purpose.
Form 990 includes detailed questions about:
• Board structure and independence
• Policies and procedures
• Oversight and documentation
• Compensation and decision-making processes
These disclosures help the IRS assess whether appropriate checks and balances are in place.

🔹 Common Audit Triggers
Lack of Board Independence
Organizations are asked whether a majority of their board members are independent.
Independence is evaluated based on:
• Compensation relationships
• Family relationships
• Business relationships
⚠️ A lack of independence may raise concerns about oversight and decision-making.

Missing or Weak Policies
The IRS reviews whether organizations have key policies, including:
• Conflict of interest policy
• Whistleblower policy
• Document retention policy
⚠️ Having policies is not enough—they must be implemented and followed.

Inconsistent or Inaccurate Disclosures
Governance disclosures must align with actual practices.
For example:
• Indicating that the board reviews Form 990 when it does not
• Stating that policies are in place but not followed
• Providing inconsistent answers across the return
⚠️ Inconsistencies are a common trigger for further review.

Lack of Documentation
Organizations must maintain contemporaneous documentation of:
• Board meetings
• Committee meetings
• Key decisions
⚠️ Without documentation, it is difficult to demonstrate that proper oversight exists.

Limited Oversight of Compensation and Transactions
The IRS reviews how organizations approve:
• Compensation of officers and key employees
• Related party transactions
• Significant financial decisions
⚠️ Lack of independent review or documentation can raise concerns about private benefit.

📌 The Most Common Issue: Form Over Substance
Many organizations have policies in place, but they are not consistently followed or documented.
For example:
• A conflict of interest policy exists, but disclosures are not updated
• Board review is indicated, but not formally documented
• Procedures are informal rather than structured
The IRS evaluates not just what is written, but what is actually done.

📊 A Practical Approach
Organizations can strengthen governance and reduce audit risk by:
• Reviewing policies annually and updating as needed
• Ensuring practices align with written policies
• Maintaining clear and contemporaneous documentation
• Involving independent board members in key decisions
• Coordinating between governance, legal, and finance functions
Strong governance is built on both structure and consistency.

📌 Why This Matters
Governance disclosures on Form 990 are publicly available and often reviewed by:
• Donors and grantors
• Regulators
• Rating organizations
Weak governance can create both compliance risk and reputational risk.

📌 Final Thought
Governance and internal controls are not just administrative requirements—they are a reflection of how an organization operates.
Clear, consistent, and well-documented governance practices help demonstrate accountability, reduce risk, and support long-term sustainability.

We’ll continue this series with a closer look at:
- Filing and compliance risks
- Common mistakes that lead to penalties

04/02/2026

IRS Audit Triggers for Nonprofits (Part 4): Related Party Transactions the IRS Reviews Closely

Transactions involving insiders are one of the most common areas of IRS scrutiny for nonprofit organizations.
Even when these transactions are appropriate, they must be properly structured, documented, and disclosed.
Understanding how the IRS evaluates related party transactions is critical to reducing audit risk.

📊 What Are Related Party Transactions?
Related party transactions generally involve individuals or entities that have a close relationship with the organization, including:
• Officers
• Directors
• Key employees
• Family members of insiders
• Entities controlled by insiders
These relationships are disclosed on Form 990, Schedule L, and in some cases, other parts of the return.

🔹 Why the IRS Focuses on These Transactions
The IRS reviews related party transactions to ensure that nonprofit organizations are not providing private benefit to insiders.
These transactions are not prohibited—but they must be:
• At fair market value
• In the organization’s best interest
• Properly approved and documented
⚠️ Lack of transparency is often what triggers scrutiny—not the transaction itself.

🔹 Common Audit Triggers
Business Transactions with Insiders
Payments to companies owned or controlled by board members or officers are closely reviewed.
Examples include:
• Consulting agreements
• Vendor contracts
• Service arrangements
⚠️ These must be at arm’s length and supported by appropriate documentation.

Loans to or from Insiders
Loans involving insiders can raise concerns, particularly if:
• Terms are not clearly documented
• Interest is below market rates
• Repayment terms are unclear
⚠️ These transactions are specifically disclosed on Form 990.

Leases and Use of Property
Leasing arrangements with insiders—such as office space or equipment—must be carefully structured.
The IRS evaluates whether:
• The terms reflect fair market value
• The arrangement benefits the organization

Family Relationships
Transactions involving family members of insiders may also be considered related party transactions.
⚠️ These relationships must be identified and disclosed where required.

Incomplete or Missing Disclosures
One of the most common audit triggers is failing to fully disclose related party transactions.
This includes:
• Omitting transactions from Schedule L
• Providing incomplete information
• Inconsistent reporting across the return

📌 The Most Common Issue: Lack of Process
Many organizations do not have a formal process for identifying and reviewing related party transactions.
As a result:
• Transactions may not be flagged early
• Documentation may be incomplete
• Disclosures may be inconsistent
The issue is often not the transaction itself—but the lack of clear procedures and oversight.

📊 A Practical Approach
Organizations can reduce risk by implementing structured processes:
• Maintain and update conflict of interest disclosures annually
• Identify potential related parties before entering into transactions
• Obtain independent approval from disinterested board members
• Document how terms were determined (e.g., comparability data)
• Ensure accurate reporting on Form 990
Coordination between governance, finance, and leadership is key.

📌 Final Thought
Related party transactions are not inherently problematic—but they are highly visible and closely reviewed.
Proper structuring, documentation, and disclosure can help ensure that these transactions withstand scrutiny and support the organization’s compliance.

We’ll continue this series with a closer look at:
• Governance and internal controls
• Filing and compliance risks

03/31/2026

IRS Audit Triggers for Nonprofits (Part 3): Compensation & Private Benefit Risks

One of the most closely reviewed areas in nonprofit audits is compensation and private benefit.
Tax-exempt organizations are required to operate for a public purpose—not private interests. When compensation or financial arrangements appear excessive or improperly structured, it can raise significant concerns.
Understanding how the IRS evaluates these areas is critical for reducing risk.

📊 What the IRS Is Looking For
The IRS focuses on whether an organization’s earnings are being used to benefit insiders, including:
• Officers
• Directors
• Key employees
• Related parties
This is commonly referred to as private inurement or private benefit.
⚠️ Even unintentional issues can trigger scrutiny.
🔹 Common Audit Triggers
Excessive Compensation
The IRS reviews whether compensation paid to insiders is reasonable based on the services provided.
This includes:
• Salary and bonuses
• Deferred compensation
• Fringe benefits
Compensation that appears above market without proper support may be considered an excess benefit transaction.
Lack of Documentation
Even reasonable compensation can raise concerns if there is no documented approval process.
Best practices include:
• Independent board or committee review
• Use of comparable market data
• Written documentation of decisions
⚠️ Without documentation, it is difficult to demonstrate that compensation is reasonable.

Payments to Related Parties
Transactions involving insiders or their affiliated entities are closely reviewed.
Examples include:
• Consulting arrangements
• Contracts with board members’ businesses
• Lease agreements
⚠️ These transactions must be at arm’s length and properly disclosed.

Revenue Sharing or Benefit Arrangements
Arrangements where insiders receive a share of revenue or benefits tied to organizational activities can raise concerns.
The IRS evaluates whether these arrangements provide private benefit beyond what is permissible.

Unreported Benefits
Compensation is not limited to salary.
It may also include:
• Housing allowances
• Expense reimbursements
• Use of organizational assets
• Other fringe benefits
⚠️ Failure to report these benefits properly can lead to compliance issues.

📌 The Most Common Issue: Process vs. Outcome
Many organizations focus on whether compensation is reasonable, but the IRS also evaluates how decisions are made.
A strong process includes:
• Independent review
• Use of comparability data
• Documentation of decisions
This is often referred to as establishing a “rebuttable presumption of reasonableness.”

📊 Why This Matters
Issues related to compensation and private benefit can have serious consequences, including:
• Intermediate sanctions (excise taxes)
• Required correction of transactions
• Increased scrutiny from the IRS
• Reputational risk
These areas are not only technical—they are also highly visible to stakeholders.

📊 A Practical Approach
Organizations can reduce risk by:
• Establishing formal compensation review processes
• Documenting board and committee decisions
• Using independent data to support compensation
• Reviewing related-party transactions regularly
• Ensuring full and accurate disclosure on Form 990
Coordination between leadership, governance, and finance is key.

📌 Final Thought
Compensation and private benefit issues are among the most common areas of IRS scrutiny for nonprofits.
Even well-intentioned arrangements can create risk if they are not properly structured and documented.
A proactive, well-documented approach helps ensure compliance and reinforces trust in the organization’s operations.

We’ll continue this series with a closer look at:
• Related party transactions and disclosures
• Governance practices that reduce audit risk

TrimnerBeckham, PLLC

04/23/2026

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04/16/2026

04/14/2026

04/09/2026

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