Charity and nonprofit audits: Closing agreements

An exempt organization may request a closing agreement when a satisfactory resolution to tax issues can't be achieved via normal procedures.  For closing agreements involving an audit, an organization should work with the revenue agent conducting the audit.  

To initiate a closing agreement unrelated to an examination, an exempt organization sends a letter to the EO closing agreement coordinator for Examination closing agreements:

Internal Revenue Service
Attn: EOCAC
1100 Commerce St. MC 4920 DAL
Dallas, TX 75242

The letter must contain the following information:

1. Why a closing agreement is appropriate
2. The advantages to the organization and how the government will sustain no disadvantages
3. A detailed description of the method proposed for correcting non-compliant activities
4. A narrative description of each step of the correction method, providing specific information to support the suggested method
5. How the taxpayer will achieve future compliance
6. Proposed methodology to calculate any tax, interest, and penalty, for the tax period(s)

Additional information

• Internal Revenue Manual 4.70.14, Exempt Organizations Examination Procedures, Exempt Organizations Closing Agreements
• Internal Revenue Code section 7121
• Treasury Regulations § 301.7121-1 PDF

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