Death to Organizations That Fail to File

Is that a catchy subject line or what?

In completing the 990 for the AWSA yesterday I discovered some changes that will affect nonprofit's that normally don't file due to the gross receipts test. I know many folks are connected with clubs that are considered nonprofits and if you haven't filed an exempt organization return in the past, you no doubt will in the future. (Ed S )

The IRS has announced the next round of changes required by the Pension Protection Act of 2006, in short:

Smaller nonprofits will be required to file Form 990-N starting in 2008. Organizations that fail to file Form 990, 990-EZ, 990-PF, or 990-N for three consecutive years will lose their tax exemptions.

Starting next year, an organization that does not file IRS Form 990 or 990-EZ because its income is $25,000 or less will have to file Form 990-N, the "Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ." There are exceptions for Churches, etc.

The Form 990-N will cover tax periods beginning after December 31, 2006, and will be due on the 15th day of the 5th month after a nonprofit's fiscal year ends. No extensions will be granted. Although there will be no financial penalty for filing late or failure to file, the ultimate penalty for not filing will be severe: nonprofits that do not file for three consecutive years will lose their tax exemptions.

Organizations that file Form 990-N will be required to provide the following information:

Organization name
Any other names the organization uses
Mailing address
Web site address (if applicable)
Employer Identification Number (EIN)
Name and address of a principal officer for the organization
Annual tax period
A statement that the organization's gross receipts are normally $25,000 or less Indication that the organization is going out of business (if applicable)

Form 990-N will be filed electronically through the Internet; no paper returns will be filed. The IRS anticipates that Form 990-N filers will not need to purchase additional software, and that organizations that do not have computer or Internet access will be able to complete the e-Postcard at places such as their local libraries.

Watch the mail this summer for an educational letter from the IRS providing more information. The IRS will begin sending out the letters in July. The service will also release information on filing procedures when the e-postcard filing system is ready for use.

To recap: The Pension Protection Act of 2006 requires the IRS to revoke the tax exemption of any nonprofit that fails to file a return for three years in a row for tax years beginning January 1, 2007. Thus, in May 2010, nonprofits that have failed to file Form 990, 990-EZ, 990-PF, or 990-N for three consecutive years will begin losing their tax-exempt status. To regain their exemptions, such organizations will have to apply using Form 1023, "Application for Recognition of Exemption," or Form 1024, "Application for Exemption under Section 501(a).

(Message edited by surfdad on May 16, 2007)