IRS Form 990
501(c)3 organizations are required to file Form 990, but not doing so for three (3) consecutive years (2007, 2008 and 2009), automatically lost exempt status after May, 17, 2010. The IRS extended the deadline for nonprofits until October 15, 2010.
Did this happen to you?
Starting with tax year 2007, the IRS introduced Form 990-N to its lineup of Form 990 information returns. Form 990-N is an "electronic postcard" that must be filed by organizations previously exempted from filing Form 990 or 990-EZ due to gross revenue being below $25,000 per year. Along with the new form, another change was made to tax law, that being a new statute requiring the automatic revocation of the tax exempt status of any 501(c) organization that fails to file the required version of Form 990 for three consecutive years. This is the first year that the statute will be invoked. The only reprieve is for organizations filing an extension for the 2009 return by May 17...with the notable exception of Form 990-N, which is not extendable.
If you think your organization may have lost its tax exemption, give us a call. We will evaluate the situation and help you determine the best course of action to take.
Understanding Form 990
On July 26, 2010, the IRS released a guidance on filing relief for Form 990-N and 990-EZ filers in danger of losing their tax exemptions. However, this one-time relief is ONLY available to small organizations whose filing deadlines fall on or after May 17, 2010, and before October 15, 2010. (All returns filed under this program are due no later than October 15, 2010.)
These events beg the question: Why is it important to preserve an organization’s tax-exempt status?
A nonprofit organization has numerous benefits that will help it to survive economically. There are also benefits to the contributors, which make a donation to the organization more attractive. Some of the benefits of being a nonprofit organization include:
- Exemption from paying federal income tax.
- May receive tax-deductible gifts.
- May receive tax-deductible contributions.
- Eligibility to receive grants from foundations.
- Contributions to a nonprofit are tax deductible for donors to the organization.
Protecting the organization’s tax-exempt status is vitally important to a nonprofit organization. But, what happens to a nonprofit that loses its exemption? What happens if a donor gives to a charity that has lost its exemption?
Contact OWL Risk Management Consulting at 1-866-579-7475 to find out the answers to these questions and more!