Very small tax-exempt organizations get an extended filing deadline to preserve their exempt status
The IRS is offering very small tax-exempt organizations an extended filing deadline to preserve their exempt status. Nonprofits that failed to file Form 990-N, Electronic Notice (ePostcard) by May 17, 2010 may file between now and October 15, 2010. The Service is also opening a voluntary compliance program (VCP) for exempt organizations eligible to file Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. The extended filing deadline and the VCP are not available to exempt organizations required to file Form 990, Return of Organization Exempt from Income Tax, or Form 990-PF, Return of Private Foundation.
Form 990-N Filers
Very small exempt organizations with annual gross receipts of $25,000 or less must file Form 990-N. An exempt organization that fails to file Form 990-N (or Forms 990-EZ or 990 if required) for three consecutive years automatically loses its tax-exempt status (IR-2010-59; TAXDAY, 2010/05/10, I.2). The filing deadline was May 17, 2010 (TAXDAY, 2010/05/20, I.5).
"The IRS has sent over one million letters to small non-profits alerting them about the filing requirement," IRS Commissioner Douglas H. Shulman said during a July 26 press conference in Washington, D.C. "Even with that effort, we found when we got to May 17, 2010, the first date that would trigger the three-year rule, many organizations still had not filed a return."
In response, the IRS is extending the Form 990-N filing deadline to October 15, 2010. "If an organization files by October 15, 2010 the organization will be back in compliance," Shulman explained.
Form 990-N must be filed electronically. The IRS’s Form 990-N e-filing system can be accessed here. Filers must provide, among other things, the name and mailing address of the exempt organization; the name and address of a principal officer; and confirmation that annual gross receipts are $25,000 or less.
If a very small exempt organization is a subordinate of a parent organization and the organization is included on the parent’s group return, the organization is not required to file Form 990-N, IRS officials explained at the news conference. Small organizations should confirm that a parent has filed a group return. If not, the small organization should contact the IRS for assistance, the officials noted.
Form 990-EZ Filers
Exempt organizations with gross receipts of less than $500,000 and total assets of less than $1.25 million may file Form 990-EZ. The VCP allows Form 990-EZ filers to file delinquent returns by October 15, 2010 to preserve their exempt status.
To participate in the VCP, an organization must:
- File complete (all required schedules and attachments) paper Forms 990-EZ or, at its option, Forms 990, for its 2007, 2008 and 2009 tax years by the extended due date of October 15, 2010;
- Submit a signed checklist agreeing to the terms of the VCP; and
- Pay a compliance fee.
The compliance fee varies based on the size of the exempt organization. The IRS has posted frequently asked questions (FAQs) about the VCP here.
Form 990 Filers
Exempt organizations required to file Form 990 or Form 990-PF are not eligible for the special filing relief and VCP, Shulman explained. Form 990 and Form 990-PF filers are automatically revoked if they fail to file for three consecutive years.
Online Database
The IRS has posted a list of organizations at risk of losing their tax exemption for failure to file. The list includes Form 990, 990-EZ, 990-PF and 990-N filers and can be found here.
The IRS also posted an internal directive for processing Forms 990-N and the VCP. The IRS noted that an organization that does not qualify for relief may seek to have its exempt status reinstated.
