Monday, July 26, 2010

IRS Offers Relief for Failure to File Form 990-N or 990-EZ

As discussed previously on this blog, the 2009 tax year is the first year for which the filing provisions of the Pension Protection Act of 2006 come into effect. Specifically, exempt organizations that have not filed a federal informational tax return (Form 990) for three consecutive years are now subject to automatic revocation of their exempt status.

Even small organizations with annual income less than $25,000 are required to file the Form 990-N, the "e-postcard" for exempt organizations. This filing requirement for small organizations represents a change in the law and, despite considerable publicity and outreach by the IRS, many organizations may not yet be aware of their need to file, or they were not aware of it before the filing deadline of May 17, 2010.  In fact, it is estimated that nearly 300,000 organizations are in danger of losing their exempt status as a result of their failure to file a return.

In light of this, the IRS has announced today that it is offering a one-time relief program to small organizations. Organizations can preserve their exempt status under this program by filing past due returns, either Form 990-N or Form 990-EZ by October 15, 2010. Organizations required to file Form 990 or Form 990-PF are not eligible for relief under this program. If these are subject to the automatic revocation of their exempt status, they will have to re-apply for exemption using the Form 1023 or Form 1024 applications. 

The IRS has posted the names and addresses, listed by state, of those organizations that are at risk of losing exemption for failure to file returns for the past three consecutive years. Every organization manager - president, CEO, board member, treasurer, secretary, CFO, etc - should take a look at this list and confirm that their organization is not listed, regardless of how certain they are of the filing status of their organization.  A cursory review of the list suggests that there are many entities here that may be related to larger organizations as affiliates, subsidiaries or chapters, which nevertheless have independent exempt status. Also, there appear to be listed organizations that are, in fact, churches. While these organizations may not be required to file an informational return, they should contact the IRS and confirm their status as churches so as to avoid future confusion and potential loss of exemption.