Understanding the Compilation Service For a small 501(c)(4) organization like yours—generating $350,000 in gross revenues with minimal expenses—a compiled financial statement may be the most cost-effective option for meeting your reporting needs. A compilation is the most basic level of financial statement service. In a compilation engagement, a CPA takes the financial information provided by management and assembles it into formal financial statements. However, the CPA performs no verification, testing, or inquiry work to confirm the accuracy of the information. Because there is no verification, a compilation provides no assurance that the financial statements are free from material misstatement. It is often the right fit for organizations that need formal statements for internal use, grant applications, or simple reporting requirements where external scrutiny is not expected. For a new organization with straightforward finances, a compilation can provide the professional presentation you need without the cost of a review or audit. Why Your 501(c)(4) Might Need a Compilation As a CFO, you may be asked to provide financial statements to your board, donors, or grantors. Even if no one has explicitly required an audit or review, having professionally compiled statements demonstrates financial responsibility and transparency. This can be particularly important for a new organization seeking to build credibility with funders. It’s important to understand that IRS recognition of your 501(c)(4) status does not automatically require a compilation or audit. The IRS does not mandate these services for tax-exempt organizations at the federal level. However, state laws or funder requirements may create an obligation. In Virginia, for example, nonprofits with gross annual revenue of $750,000 or more must provide a financial review performed by an independent CPA when applying for or maintaining certain sales tax exemptions. For organizations below that threshold, no state-mandated review or audit is required. Finding the Right CPA Firm Since you are comparing firms for the lowest fee, here are practical tips: Ask about fixed-fee pricing. Many CPA firms offer flat-rate pricing for compilations, which provides predictable costs without hourly billing surprises. Understand what is included. A compilation engagement typically includes preparing the financial statements (balance sheet, income statement, and cash flow statement) and a compilation report that clearly states no assurance is provided. Additional services like bookkeeping or general ledger preparation may be available for an additional fee. Consider the long-term relationship. The CPA who prepares your compilation can also help with tax filing and future planning needs, potentially saving you time and money by working with a single firm. How Nova Tax & Accounting Can Help At Nova Tax & Accounting Services, we provide affordable compilation services for nonprofits and small organizations. Our team can prepare clean, professionally formatted financial statements from your financial records. We also offer bookkeeping and accounting services to help you organize your records before the compilation. For more information, visit https://novataxservices.com/ or schedule a free consultation. External Links: IRS Charities and Nonprofits IRS Form 990-N (e-Postcard)
Understanding Why the DC Office of Tax and Revenue Conducts Audits The District of Columbia Office of Tax and Revenue (OTR) Audit Division is responsible for ensuring compliance with all District tax laws, except real property taxes. Its mission is to obtain, maintain, and achieve tax compliance through the examination of filed tax returns, identification of non-filers, and discovery of unreported tax revenue. Audits are conducted in a manner designed to provide fair, firm, and uniform treatment to all taxpayers. If your return is selected for examination, it does not necessarily mean the agency suspects wrongdoing—many audits are simply routine reviews to verify that reported information is accurate and supported by proper documentation. What to Expect During the Audit Process When an audit begins, the auditor will contact you to explain the scope of the examination, the records you may need to provide, and the method that will be used to conduct the audit. Audits may be handled through correspondence, interviews, or a combination of both. You have the right to request that the audit take place at a reasonable time and location. Throughout the process, the auditor should explain any proposed adjustments to your return and the reasons behind them. You are also entitled to receive copies of the audit work papers and written notice of your appeal rights once a determination is made. Your Rights as a DC Taxpayer Taxpayers in the District have specific rights during an audit. You may represent yourself or authorize a qualified representative—such as a CPA, enrolled agent, or attorney—to act on your behalf. If you disagree with the audit findings, you have the right to request an informal conference. These conferences are conducted by trained hearing officers who were not involved in your audit, ensuring an independent review of your position before a final determination is issued. You also have the right to request technical advice and legal opinions from the Audit Division by writing to the Office of Tax and Revenue. Resolution Options and Next Steps If the audit results in additional tax due, several resolution options may be available, including payment plans and other settlement arrangements. The Voluntary Disclosure Program allows eligible taxpayers to come forward voluntarily to report and resolve tax obligations without incurring certain penalties. For cases that cannot be resolved informally, formal appeal processes exist. Navigating a DC tax audit can be complex, but you do not have to face it alone. How Nova Tax & Accounting Can Help At Nova Tax & Accounting Services, we provide professional representation and guidance for taxpayers facing audits and disputes. Our team helps you understand your options, respond to information requests, and work toward the best possible outcome. Whether you need assistance with a DC tax audit, IRS examination, or state tax matter, our experienced CPAs are here to help. We serve taxpayers throughout Washington DC, Virginia, and Maryland. To learn more about our audit and assurance services, visit https://novataxservices.com/audit-attestation-services/ . Reference Source: DC Office of Tax and Revenue – Audit Division
The Landscape Has Changed For Virginia’s nonprofit sector—home to approximately 53,000 registered organizations—the compliance environment in 2026 is fundamentally different from anything that came before. A convergence of new federal directives, expanded IRS enforcement authority, and heightened political attention to tax-exempt organizations has created an atmosphere of unprecedented scrutiny. The signals are unmistakable. According to multiple published reports, the Trump administration has directed the IRS’s Criminal Investigation Division (IRS-CI) to focus on organizations it deems politically adversarial. The Wall Street Journal described how the IRS is being reorganized to enable easier pursuit of investigations into “left-leaning groups”. For nonprofit leaders across Virginia—from large associations in Arlington to community organizations in Richmond and faith-based networks in Hampton Roads—the message is clear: governance, compliance, and documentation now matter more than ever. This guide provides a comprehensive overview of the new scrutiny landscape, the specific compliance obligations facing Virginia nonprofits, and practical steps organizations can take to protect their tax-exempt status and continue serving their missions. The New Federal Enforcement Framework National Security Presidential Memorandum 7 (NSPM-7) The most significant development shaping the current environment is National Security Presidential Memorandum 7, issued in September 2025. This directive, which addresses “Countering Domestic Terrorism and Organized Political Violence,” has profound implications for tax-exempt organizations. On December 4, 2025, U.S. Attorney General Pam Bondi issued an internal directive implementing NSPM-7, substantially expanding the federal government’s approach to identifying, investigating, and prosecuting alleged domestic terrorism. This directive: Mandates new investigative procedures across federal agencies Broadens key definitions to include a wider range of activities Introduces enhanced enforcement mechanisms that can be applied to nonprofit organizations The implications for nonprofits are serious. As one legal analysis notes, “Together, these changes significantly elevate the risk landscape for nonprofits, donors, advocacy organizations, and other taxpayers”. Organizations must now treat their compliance, records, governance, and operations as though they could be subject to criminal exposure, reputational harm, and loss of exempt status. IRS Criminal Investigation Focus Historically, IRS-CI operated under Internal Revenue Manual 9.1.1.4(3), which explicitly prohibited opening investigations based on political affiliation. Investigations were initiated based on leads from other IRS divisions, other agencies, informants, or whistleblowers. According to reports, this is changing. The IRS is being reorganized to enable easier pursuit of investigations into organizations deemed politically adversarial. This represents “a full-scale shift in how the Internal Revenue Service handles tax-exempt organizations”. For Virginia nonprofits, the implications are particularly acute. The Eastern District of Virginia has been identified as a favored venue for federal enforcement actions, making organizations with offices in the Commonwealth potentially more vulnerable to investigation. Congressional Pressure on the IRS Congress has also intensified its oversight of the nonprofit sector. In January 2026, House Ways and Means Committee Chairman Jason Smith and all Republican members of the Committee called on the IRS to overhaul its oversight of the nonprofit sector, citing concerns about fraud and abuse. The Committee’s ongoing investigation has already resulted in the referral of multiple nonprofit organizations to the IRS for revocation of tax-exempt status. New IRS Guidance: Three Technical Guides for Exempt Organizations In June 2025, the IRS published three new Technical Guides (TGs) that replace corresponding Audit Technique Guides (ATGs). These guides provide comprehensive, issue-specific guidance for IRS examiners and offer valuable insight for nonprofits seeking to understand what the IRS looks for during examinations. TG 3-8: Inurement and Private Benefit This guide addresses the concepts of inurement and private benefit for Section 501(c)(3) organizations. Organizations exempt under Section 501(c)(3) must avoid engaging in impermissible conduct, including that which results in private benefit and inurement. An otherwise qualifying organization will be disqualified for exemption if it benefits private interests, either through inurement of its net earnings to certain “insiders,” or by primarily benefiting the interests of persons who, though not “insiders,” do not comprise a charitable class. Nonprofit leaders should review this guide to ensure their compensation practices and transactions with insiders are defensible. TG 3-27: Public Charity Foundation Classifications This guide addresses public charity foundation classifications under Sections 509(a)(1) and 509(a)(4). It covers organizations for the benefit of certain state and municipal colleges and universities, governmental units, agricultural research organizations, and organizations testing for public safety. For Virginia nonprofits that operate in partnership with public universities or government entities, this guide provides essential guidance on maintaining proper classification and avoiding unintended private foundation status. TG 70: Non-Exempt Charitable Trusts and Split-Interest Trusts This guide addresses technical information and examination techniques regarding non-exempt charitable trusts (NECTs) and split-interest trusts. These trusts are subject to certain excise taxes under Chapters 41 and 42 pursuant to Section 4947. Organizations that operate charitable trusts or split-interest arrangements should familiarize themselves with this guidance to ensure compliance with applicable excise tax provisions. Virginia-Specific Compliance Requirements Charitable Solicitation Registration Virginia law requires that every charitable organization intending to solicit contributions within the Commonwealth, or have funds solicited on its behalf, must register with the Office of Charitable and Regulatory Programs (OCRP) prior to any solicitation. The OCRP is part of the Virginia Department of Agriculture and Consumer Services (VDACS). Recent news illustrates the consequences of non-compliance. In Virginia Beach, a local nonprofit contracted by the city to solicit donations for a public park was found to be “not authorized to solicit in Virginia” because it had failed to renew its registration, which expired in November 2023. The organization was unable to legally raise funds for the project until it resolved its registration status. Virginia nonprofits should verify their registration status annually and ensure renewals are filed on time. The registration must be renewed annually within 5.5 months after the end of the organization’s fiscal year. Virginia Sales and Use Tax Exemption To qualify for Virginia’s sales and use tax exemption, a nonprofit organization must meet several requirements: The organization must be exempt from federal income taxation under §§ 501(c)(3), 501(c)(4), or 501(c)(19) Proof of compliance with Virginia’s law relating to organizations that solicit contributions Annual administrative costs (including salaries and fundraising) must not exceed 40%