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Private Foundation Audit Response: The Current IRS Initiative, Form 4720, Disqualified Persons

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, October 7, 2020

Recorded event now available

or call 1-800-926-7926

This course will cover the latest IRS campaign targeting private foundations for 990-PF return preparers and advisers to foundations. Our panel of foundation experts will explain how to prepare form 990-PF to avoid selection and offer advice for handling the IRS examination of these charitable organizations.


The IRS stated that it is taking a closer look at private foundations and has trained over 400 agents to focus on the use of private foundations by wealthy individuals. The IRS has pulled records on 1,000 private foundations for further examination. The IRS' Wealth Squad is seeking possible misuse of private foundations to lower the overall tax burden of the wealthy.

Restitution for unauthorized acts can be substantial, resulting in fines, undoing transactions, and ultimately the loss of the organization's tax exempt status. The loss of exempt status could result in an organization paying income tax on 50 percent on its earnings.

The Service can impose penalties and excise taxes for prohibited acts on substantial contributors, foundation managers, certain related persons, and the foundation. Similar to related parties but distinctly different are disqualified persons (DPs). Transactions between the foundation and DPs are always questionable and must be analyzed. Since once an individual is a DP, they remain a DP, this can be a substantial undertaking.

In addition to IRS scrutiny, an organization's Form 990-PF is available for public view via GuideStar or the organization. Understanding what and how to present the private foundation in the best light is critical for preparers of Forms 990-PF.

Listen as our panel of private foundation experts discusses the IRS' latest campaign targeting private foundations, including tips for handling a PF audit, what transactions the IRS is targeting, and how to prepare Form 990-PF to lessen the likelihood of selection



  1. The IRS' latest initiative
  2. Areas of potential exposure for private foundations
  3. Form 4720: Return of Certain Excise Taxes Under Chapters 41 and 42 of the IRC
  4. Disqualified persons
  5. Handling the audit
  6. Penalties and sanctions
  7. Best practices


The panel will review these and other critical issues:

  • What is the current status of IRS' current initiative targeting private foundations?
  • What noncompliance areas is the IRS focusing on in its examinations?
  • What steps can 990-PF preparers take to mitigate the chance of PF audits?
  • What does and does not need to be disclosed on the 990-PF?
  • How are DPs defined; when and how are transactions with DPs reported?


Cook, Jake
Jake Cook, CPA

Nonprofit Tax Managing Director

Mr. Cook specializes in his firm’s tax-exempt practice and is part of his firm’s nonprofit industry team....  |  Read More

Lyons, Robert
Robert Lyons, CPA, MST

Tax Director
Marks Paneth

Mr. Lyons is a Tax Director, Exempt Organizations in the Nonprofit, Government & Healthcare Group at Marks Paneth...  |  Read More

Petermann, Christopher
Christopher D. Petermann

PKF O'Connor Davies

Mr. Petermann is a Partner of the Firm and serves as Co-Partner-in-Charge for the Private Foundation Practice. He has...  |  Read More

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