When a nonprofit organization issues a request for proposal (RFP) for audit and tax services, the responses it receives reveal as much about the firms as the firms learn about the organization. Some responses are thorough, specific, and demonstrate an understanding of the nonprofit’s operations. Others are generic templates that could apply to any organization in any sector. This guide describes what a CPA firm looks for in an RFP response, what the evaluation process typically involves, and how organizations can structure their RFP to attract the right firms and produce a decision-ready set of proposals. The Letter of Introduction: What It Should Contain The letter of introduction is the first document the firm reads. It sets the tone. A strong letter includes: Organization background. A brief description of the organization’s mission, size, and structure. This helps the firm assess whether it has relevant experience. Scope of services requested. Clear identification of what the organization is seeking: financial statement audit, Single Audit, Form 990 preparation, tax advisory, or a combination. Current service providers. The name of the current auditor and the reason for the change. This is not an invitation to criticize the incumbent but a signal of what the organization values. Timeline. The anticipated start date, the fiscal year end, and any deadlines that affect the engagement. Contact information. A single point of contact for questions and follow-up. What the RFP Should Ask A well-structured RFP asks questions that allow firms to demonstrate competence rather than simply state it. Useful questions include: Firm experience. How many nonprofit clients does the firm serve? What is the size range? Are any clients similar in mission or structure to the organization? Single Audit experience. If the organization expends $1 million or more in federal awards, does the firm have Single Audit experience? How many Single Audits does it perform annually? Team composition. Who will be assigned to the engagement? What are their credentials and experience? Will the partner be involved in fieldwork or only in review? Approach to materiality and risk. How does the firm determine materiality? What areas does it typically identify as high-risk for organizations in this sector? Fee structure. Is the fee fixed or hourly? What is included, and what is billed separately? Are there any additional charges for out-of-scope work? References. Can the firm provide references from similar organizations? The Evaluation Process A typical evaluation process involves: Screening. The organization reviews responses against the minimum requirements: active CPA license, nonprofit experience, and capacity to meet the timeline. Scoring. A committee scores each firm on experience, approach, team qualifications, and fee. The weighting varies by organization. Interviews. Shortlisted firms are invited to present. This is an opportunity to meet the engagement team and ask specific questions. Reference checks. The organization contacts references to ask about responsiveness, communication, and the firm’s handling of issues that arose during the engagement. Selection. The organization selects the firm and negotiates the engagement letter. What Firms Want from the Organization The best RFP processes are collaborative. Firms appreciate: A clear scope. Ambiguity about whether a Single Audit is required or whether tax services include Form 990 preparation creates uncertainty that firms price defensively. Access to prior-year reports. The prior auditor’s reports, management letters, and any findings provide context that helps firms understand the organization’s risk profile. A realistic timeline. A request for a proposal due in one week and an engagement to begin in two weeks signals disorganization. Firms that respond to such timelines may not be the most qualified. Transparency about budget. If the organization has a budget range in mind, sharing it allows firms to propose an appropriate scope rather than guessing. Virginia and DC Nonprofit Considerations Nonprofits in Virginia and DC face specific compliance obligations that should be reflected in the RFP. Virginia requires charitable solicitation registration with VDACS and, for organizations with gross annual revenue of $750,000 or more, a financial review performed by an independent CPA. DC requires separate tax exemption filing with the Office of Tax and Revenue. The RFP should specify which jurisdictions the organization operates in and what filings are required. This allows firms to price the engagement accurately and avoid surprises after selection. How Nova Tax & Accounting Services Can Help Nova Tax & Accounting Services provides audit, tax, and advisory services to nonprofit organizations across Virginia and Washington DC. Our team has experience with financial statement audits, Single Audits, Form 990 preparation, and charitable registration compliance. Organizations seeking a proposal can contact us at https://novataxservices.com/ or schedule a consultation to discuss scope and timing. Additional Resources IRS Form 990 Series Uniform Guidance (2 CFR Part 200) Virginia Department of Agriculture and Consumer Services DC Office of Tax and Revenue Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified professional for advice regarding your specific situation.
The phrase “tax related issues” covers a wide range of problems, from a single notice that can be resolved with one letter to a multi-year pattern of noncompliance that requires a structured resolution plan. What a CPA firm does depends entirely on which of these situations applies. This guide describes the engagement process from the firm’s perspective—what information is gathered, how the problem is assessed, and what resolution pathways are available. It is written for business owners who want to understand what happens after the first phone call. The Diagnostic Phase: Understanding the Problem Before Acting The most common mistake businesses make when facing a tax problem is acting before understanding it. Filing an amended return based on a guess, calling the IRS without knowing what to ask, or ignoring a notice until the deadline passes all create worse outcomes than a measured diagnostic process. The diagnostic phase typically involves: Document collection. The firm requests all relevant returns, notices, and financial records. This establishes a factual baseline. Notice analysis. Each notice is matched to the underlying return and reviewed for accuracy. The firm determines whether the notice is correct, whether it resulted from a processing error, or whether it raises a substantive issue. Exposure assessment. The firm calculates the potential liability, including tax, penalties, and interest. This establishes the financial stakes and informs the resolution strategy. Timeline review. Deadlines are identified. Some notices require a response within 30 days; others allow 90. Missing a deadline can waive appeal rights or trigger enforcement action. Resolution Pathways Once the problem is understood, the firm selects a resolution pathway. The main options are: Penalty abatement. If penalties resulted from reasonable cause—illness, natural disaster, reliance on incorrect professional advice, or first-time errors—the firm can request abatement. The IRS grants abatement in appropriate cases, and Virginia and DC have similar provisions. Installment agreement. For businesses that can pay the liability over time but not in full, an installment agreement spreads payments over months or years. The IRS charges a setup fee and interest continues to accrue, but enforcement action is suspended while the agreement is in good standing. Offer in compromise. For businesses that cannot pay the full amount and do not have assets to liquidate, an offer in compromise settles the debt for less than the full amount. The application requires detailed financial disclosure, and acceptance depends on the IRS’s determination of the taxpayer’s reasonable collection potential . Currently not collectible. If paying the liability would prevent the business from covering basic operating expenses, the IRS may suspend collection temporarily. This does not eliminate the debt, but it stops enforcement activity. Audit representation. If the issue is an examination, the firm represents the business throughout the audit process. This includes responding to Information Document Requests, participating in interviews, and negotiating findings. What the IRS Looks For During an Audit Understanding what triggers scrutiny helps businesses prepare. The IRS selects returns for audit through random selection, related examinations (when a business partner or investor is audited), and information matching . Once selected, the auditor examines the specific items identified in the notice. The Taxpayer Bill of Rights guarantees the right to know why the IRS is asking for information and how it will be used . A CPA firm uses this right to scope the audit appropriately and avoid unnecessary expansion of the examination. The Role of Documentation Every resolution pathway depends on documentation. The IRS requires substantiation for deductions, credits, and positions taken on returns. When documentation is missing, the firm works with the client to reconstruct records using bank statements, invoices, and other secondary evidence. The Cohan rule allows taxpayers to estimate certain expenses if they can prove the expenses were incurred and provide a reasonable basis for the amount. This is not a license to fabricate records, but it does provide a pathway when primary documentation is lost. Virginia and DC: Separate but Coordinated Businesses operating in Virginia and DC face separate tax authorities with separate resolution processes. A federal resolution does not automatically resolve state liability, and vice versa. The firm coordinates both, ensuring that agreements with one authority do not create problems with the other. Virginia’s individual filing deadline is May 1, and the state operates its own collection and audit functions . DC’s Office of Tax and Revenue administers its own audits and collections. The firm maintains familiarity with both. How Nova Tax & Accounting Services Can Help Nova Tax & Accounting Services provides representation and resolution services for businesses across the DMV. Our CPAs understand what the IRS and state authorities look for, how to present information persuasively, and when to negotiate versus when to contest. For more information, visit https://novataxservices.com/ or schedule a free consultation. Additional Resources IRS Taxpayer Bill of Rights IRS Audits Offer in Compromise Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified professional for advice regarding your specific situation.
When a business owner reaches out about “tax related issues,” the conversation usually begins with a problem that has already escalated. A notice from the IRS. A letter from Virginia Tax. A payroll discrepancy that has grown over several quarters. A nagging sense that something is wrong but no clear picture of what. The instinct to handle it internally is understandable. Business owners are problem solvers by nature. But tax problems are different from operational problems. They operate on statutory deadlines, carry penalty structures that compound daily, and are governed by rules that change annually. A CPA firm’s role is not to replace the business owner’s judgment but to bring technical precision, procedural knowledge, and representation authority to a situation where those elements are decisive. This guide explains what a CPA firm actually does when a business comes in with tax issues, what the process looks like, and what to expect. The First Step: Diagnosis Before Prescription No competent CPA begins by filing an amended return or calling the IRS. The first step is diagnosis. Reviewing prior filings. The firm will request copies of the last three to five years of federal and state returns, including all schedules and supporting statements. This establishes what positions were taken, what elections were made, and whether the returns were prepared consistently. Discrepancies between years often reveal the source of a current problem. Reconciling notices to returns. IRS and state notices often reference specific line items or discrepancies. The firm will match each notice to the underlying return to determine whether the notice is correct, incorrect, or partially correct. Many notices result from simple transcription errors or missing forms and can be resolved with a single response. Identifying the scope. Is this a single-year issue or a multi-year pattern? Is it a compliance problem (failure to file, failure to pay) or a substantive problem (disputed deductions, unreported income)? The scope determines the resolution strategy. Common Business Tax Issues and How They Are Resolved Unfiled returns. When a business has fallen behind on filing, the resolution is to prepare and file all missing returns as quickly as possible. Penalties for failure to file accrue at 5% per month, up to 25% of the unpaid tax. Filing stops the accrual. In many cases, the firm can request penalty abatement if the failure was due to reasonable cause. Unpaid tax liabilities. For balances owed, options include installment agreements (monthly payment plans), offers in compromise (settling for less than the full amount), and currently not collectible status (temporary suspension of collection activity). The IRS evaluates these based on income, expenses, asset equity, and ability to pay . Payroll tax problems. Unpaid payroll taxes are treated more seriously than income tax debt because the government considers withheld taxes to be held in trust. The resolution involves filing missing Forms 941, reconciling payroll records, and negotiating payment. In some cases, the Trust Fund Recovery Penalty can be assessed personally against responsible individuals. Notice response and representation. When a business receives an IRS or state notice, the CPA can respond on the business’s behalf as an authorized representative. This includes requesting extensions, providing documentation, and negotiating with the assigned revenue agent. What the IRS Expects from Taxpayers The IRS operates under a framework of taxpayer rights, but it also expects cooperation and documentation. The Taxpayer Bill of Rights guarantees the right to be informed, the right to quality service, the right to pay no more than the correct amount, the right to challenge the IRS’s position, and the right to retain representation . These rights matter in practice. A business facing an audit or collection action has the right to have a CPA represent it, to know what information the IRS is seeking and why, and to appeal decisions it disagrees with. A CPA firm exercises these rights on the client’s behalf, which often produces a more efficient resolution than the business owner attempting to navigate the process alone. Virginia and DC Considerations Businesses in Virginia face the May 1 individual filing deadline, which differs from the federal April 15 date . Virginia Tax also operates its own collection and audit functions, separate from the IRS. A business with both federal and state issues may need coordinated resolution strategies. For DC businesses, the Office of Tax and Revenue administers audits of corporate franchise, unincorporated business franchise, and sales and use tax. The resolution process follows DC-specific rules and timelines. What to Bring to the First Meeting When a business contacts a CPA firm about tax issues, the initial consultation is more productive with the following: Copies of all IRS and state notices received The last three years of filed tax returns Financial statements for the periods in question Payroll records and Forms 941 if payroll taxes are involved Any correspondence with tax authorities The firm can work without these documents initially, but the diagnostic process accelerates when they are available. How Nova Tax & Accounting Services Can Help Nova Tax & Accounting Services provides tax resolution and representation services for businesses across Northern Virginia and Washington DC. Our CPAs have unlimited representation rights before the IRS and experience with Virginia and DC tax authorities. We help businesses diagnose the scope of their issues, develop a resolution strategy, and communicate with tax authorities on their behalf. For more information, visit https://novataxservices.com/ or schedule a free consultation. Additional Resources IRS Taxpayer Bill of Rights IRS Audits: What to Expect Offer in Compromise Virginia Tax Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified professional for advice regarding your specific situation.