written by Joe Page

Joe Page head shot

Tax laws provide that not-for-profit entities who fail to file required applicable 990 information returns for three consecutive years automatically lose their not-for-profit status. Entities whose tax exempt status has been revoked are subject to regular income tax on their income and donations to the entities will not be deductible as charitable contributions.

According to the IRS, many smaller not-for-profits may lose their tax exempt status for failing to file the relatively new 990-N or e-Postcard. These entities (gross receipts of $25,000 or less) were not required to file an information return with the IRS prior to the enactment of the Pension Protection Act of 2006. A provision of that act required these smaller not-for-profit entities to file the new notice, 990-N.

Although the IRS had made significant attempts to connect with these smaller entities, many have still not filed the required 990-N notices. The deadline for 2009 calendar year entities to file a 990 or 990-N was May 17, 2010 unless an extension was requested.

While the IRS is charged with enforcement of tax laws, according to a post on the IRS’s website by IRS Commissioner Doug Shulman, the IRS will do what it can to help these entities retain their tax exempt status. The statement also indicated that the IRS would be issuing additional guidance for entities to regain compliance in the near future.

The IRS recommends that if an entity missed the May 17 due date that they go ahead and file. Although the IRS may assess penalties for late filing, it may prevent the organization from losing its tax exempt status. If an entity loses its tax exempt status for failure to file the required 990 or 990-N it will be required to file with the IRS a form requesting reinstatement of its tax exempt status.

The Whitlock Company can assist tax exempt entities that have lost their tax exempt status. Please contact us with any questions or concerns.