Thousands of nonprofit organizations could lose their tax-exempt status if they dont file a Form 990 with the IRS by May 17.
The IRS warned earlier this week of the looming deadline. The Pension Protection Act of 2006 mandates that all nonprofit organizations, other than churches and church-related organizations, must file an information form with the IRS. The requirement has been in effect since the beginning of 2007, which made 2009 the third consecutive year under the new law. Any organization that fails to file for three consecutive years automatically loses its federal tax-exempt status, the IRS cautioned.
That could be a major problem for many nonprofits that have found filling out the redesigned Form 990 a daunting task. Many nonprofits these days are not in exactly the best financial shape, and filling out a complex financial disclosure form is about the last thing they want to do.
They could very well use the help of their local accountant in filling out the forms and making the necessary disclosures, including the compensation taken by the top officials at the organization. That may be a problem for some nonprofits that may have been paying their executives a little too lavishly, but at the majority of nonprofit organizations, the salaries drawn by administrators and staff are minimal at best. The recently redesigned Form 990 also requires more disclosure of related organizations, foreign activities, non-cash contributions and other nagging details.
Luckily, the IRS is offering a few alternative versions of the 990 to make the process less burdensome. Small tax-exempt organizations whose annual gross receipts are normally $25,000 or less can electronically submit Form 990-N, also known as an e-Postcard, which only asks eight questions. The e-Postcard says a bit more than Wishing Your Were Here, but not as much as the complete Form 990 or the somewhat EZ-ier Form 990-EZ. Private foundations are expected to file Form 990-PF.
The IRS isnt kidding about the requirements. Any tax-exempt organization that has not filed the required form in the last three years will automatically lose its tax-exempt status as of the due date of the annual filing. Not only that, but under the law, the IRS actually does not have discretion in the matter.
If thats not enough to convince recalcitrant not-for-profits, a list of revoked organizations will also be available to the public on IRS.gov.
If an organization doesnt file the form and loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. On top of that, any income received between the revocation date and renewed exemption may be taxable.
If you know of any nonprofit organizations in your area that may be lagging in this regard, its a good idea to get in touch with them in the next few days and do them a big favor by helping them fill out and file the required form. You could be saving them a great deal of trouble down the road.
