Failure to File Return = Risk of IRS Revocation

Under the Pension Protection Act of 2006, most non-profit organizations are required to file certain information with the IRS. Certain organizations (like churches) are exempt from filing informational returns with the IRS. However most organizations are required to file, and depending on the organization’s gross receipts and total assets, determines which form (Form 990, Form 990-EZ or Form 990-N) to file.

If an organization fails to file the required form for 3 consecutive years, the organization automatically loses their federal tax-exempt status. Revocation occurs on the filing due date of the 3rd year. Form 990s are due on the 15th day, following the fourth month after the organization’s calendar year-end. (Four 1/2 months after year end. If the organization’s year-end is December 31, then the return is due May 15th).

What does this mean to the organization?

1. Must reapply (Form 1023/1024) with the IRS to regain exempt status.

2. Must file income tax return.

3. Pay income tax.

4. Contributors cannot deduct donations to the organization.

How does an organization know if they are required to file a return with the IRS? Review the letter the IRS mailed to you, after they approved or denied Form 1023/1024. This letter, often referred as an IRS Determination Letter, documents whether the organization is exempt from federal income tax and what types of returns are required to be filed.

Questions about exempt status or which form to file? Contact me.