Nonprofit organizations are required to file an information return annually. See our recent post for the details on this.
Nonprofit organizations that don't meet their filing requirements for three consecutive years automatically lose their tax-exempt status.
Losing your tax-exempt status is likely something most organizations would not want. The re-application process to reinstate your tax-exempt status can be a "nightmare" and costs money and takes time. Additionally, any income received after losing their tax-exempt status would be taxable to the organization.
The IRS recently issued a list of organizations that are not in compliance with their filing requirements. These organizations have not filed in three years and are at risk of losing their tax-exempt status.
The IRS is granting one-time relief for organizations with due dates after May 17, 2010 and before October 15, 2010.
Many nonprofit organizations appear to be confused about their filing requirements. Under the old rules, organizations that normally generated less than $25,000 in revenue were not required to file anything. The IRS changed this rule several years ago. All nonprofit groups are now required to file some document at least annually. The smaller nonprofit organizations generating $25,000 or less in revenue can file the E-Postcard, Form 990-N.
There is no paper form with the Form 990-N. This is sent electronically. There are only eight questions to answer.
- Employer Identification Number (EIN)
- Tax Year
- Name and address of a principal officer
- Confirmation that the organizations gross receipts are less than $25,000
- Any other names the organization uses
- Website address, if applicable
- Local unions charted name and mailing address, if applicable
- A statement that the organization is terminating, if applicable
There are over 3,900 on the list of nonprofit organizations from Connecticut.
ACTION ITEM: If your nonprofit organization is on the list, you should file soon. Losing your tax-exempt status is likely something you don't want to happen.
Thomas Scanlon, CPA, CFP®