Estate Planning Alerts

Tax-exempts reminded to file Form 990 by May 17 or risk losing exemption

posted Oct 14, 2009, 11:16 PM by Jonelle Bohne   [ updated Mar 19, 2012, 4:01 PM ]

IRS has issued a press release reminding tax-exempt organizations to file From 990 (Return of Organization Exempt From Income Tax) by May 17, 2010, or risk having their federal tax-exempt status revoked.

Three year filing rule. Under the 2006 Pension Protection Act (PPA), a non-church exempt organization's failure to file Form 990 for three consecutive years will result in the revocation of the organization's exempt organization status under

Code Sec. 501(a) on and after the date IRS has set for filing the third annual return or notice. (Code Sec. 6033(j)(1)) The PPA rule applies for returns and notices for annual periods beginning after 2006. The revocation will be effective from the date that IRS determines was the last day the organization could have timely filed the third required information return or notice.

In the news release, IRS reminds exempts that the filing requirement has been in effect since the beginning of 2007, which makes 2009 the third consecutive year under the new law. Thus, any exempt organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.

Form 990-series information returns are due on the 15th day of the fifth month after an organization's fiscal year ends. For organizations using the calendar year as their fiscal year, May 15 is the deadline. Since May 15 falls on a Saturday this year the deadline this year is actually Monday, May 17.

Exempts are reminded that they can request an extension of their filing date by filing Form 8868 (Application for Extension of Time To File an Exempt Organization Return) by the original due date. Absent a request for extension, there is no grace period from filing by the original due date. If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.

Small tax-exempt organizations—those with annual receipts of $25,000 or less—can file an electronic notice Form 990-N (e-Postcard). This asks for a few basic pieces of information. Tax-exempts with annual receipts above $25,000 must file a Form 990 or 990-EZ, depending on their annual receipts. Private foundations file Form 990-PF.

Observation: IRS recently published a number of detailed Frequently Asked Questions (FAQs) on the automatic revocation of tax exempt status that results from an organization's failure to file Form 990, Return of Organization Exempt From Income Tax, for three consecutive years. The FAQs cover, among other topics, the rules for group exemptions, extensions of time to file, notification of revocation, and reinstatement of exempt status.

Links to IRS website for related information:

http://www.irs.gov/newsroom/article/0,,id=222668,00.html; http://www.irs.gov/charities/article/0,,id=217087,00.html.

To Be Determined

posted Oct 14, 2009, 11:11 PM by Jonelle Bohne   [ updated Mar 20, 2012, 3:48 PM ]


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