Monday, November 15, 2010

Failed to File 990s - What Now?

The IRS's October 15 last-chance deadline for the small exempt organization filing relief program has come and gone. If an exempt organization has failed to file a return for the past three consecutive years, it has had its exempt status automatically revoked, "by operation of law." The IRS does not have to take any further action in order for the revocation to take effect. A list of the organizations whose exempt status has been revoked will be posted on the IRS Website at some point, though it hasn't yet appeared. 501(c)(3) organizations that haven't filed will also be removed from Publication 78, the official list of organizations eligible to receive tax-deductible charitable contributions.

There is no way to undo the revocation, unless it was clearly an administrative error on the part of the IRS. An organization whose exempt status has been revoked may have its status reinstated by filing a Form 1023 Application for Recognition of Exemption, for 501(c)(3) organizations, or Form 1024 for all others. Even if the organization did not originally have to file for its exemption, it must do so now in order to have its exempt status reinstated. If the organization can give a reasonable cause for the failure to file past due returns, and it makes a written request together with the application, its exempt status can be reinstated back to the date of revocation. This would prevent gaps in the periods of exemption, which could be both administratively burdensome for the organization and a concern to donors.

For further information, see the FAQs regarding Automatic Revocation on the IRS website.

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