Hundreds of thousands of not-for-profit organizations are in danger of losing their tax-exempt status because they missed a critical May 17 filing deadline, however smaller nonprofits are being thrown a lifeline by the IRS. The IRS is working to help organizations with annual receipts under $25,000 maintain their tax-exempt status and encourages these groups to go ahead and file the document even though the deadline has passed.
The automatic revocation results from the Pension Protection Act of 2006, which became effective at the beginning of 2007. An estimated 214,000 organizations haven’t filed the IRS 990-N or some other form in the past three years as required by law. Many small organizations, especially those that have become inactive or dormant, were unaware of the requirement, even though the IRS has conducted an extensive outreach to tax-exempt organizations since the law came into effect.
Loss of Tax Exemption Status
If an organization loses its exemption, it must reapply with the IRS to regain its tax-exempt status. The organization can regain its tax-exempt status by filing the proper form (1023 for a 501(c)(3) or 1024 for other types of exempt organizations) and paying a $850 new application user fee. If the IRS approves the organization’s application, the group’s exempt status would become effective the date of the application. However, the approval process can take six months to a year to complete. Any income received between the revocation date and the renewed exemption may be taxable.
Tax-exempt organizations with annual receipts above $25,000 are required to file the Form 990 or Form 990-EZ annually, while private foundations file Form 990-PF. Smaller not-for-profit organizations with annual receipts of $25,000 or less can file an electronic notice, Form 990-N, which is an e-postcard. Churches and integrated auxiliaries of churches are the only nonprofit groups that are not required to file the Form 990.
Please contact your Rea not-for-profit professional if you have questions about the 990 filing requirement. Team members are experienced in completing the form and can assist you in this process. You can also visit www.irs.gov for additional information.