While most taxpayers – including for profit corporations – have already filed their tax return (or extension) for the year, it’s still filing season for many tax-exempt organizations. There are just a few days left for those organizations to comply: for most tax-exempt organizations, the key date is May 15.
May 15 is the filing deadline for calendar year tax-exempt organizations (most tax-exempt organizations are on a regular calendar tax year). Those tax-exempt organizations which observe a different tax year end have until the 15th day of the fifth month following the close of their alternate tax year to file.
Private foundations and sizable tax-exempt organizations are generally well aware of the May 15 deadline. However, many small tax-exempt organizations are still not in the habit of filing each year. That’s because for years, most small tax-exempt organizations were exempt from filing. That changed when the Pension Protection Act of 2006 made it mandatory for all tax-exempt organizations (except those specifically exempt) to file an annual information return or notice with the IRS regardless of how much – or little – income the organization receives. The new rule was effective beginning in calendar year 2007.
Tax-exempt organizations which don’t have unrelated trade or business income rarely pay federal income tax so it wasn’t completely out of question that tax-exempt organizations might ignore the reporting requirements (no tax, no penalty, right?). To “encourage” compliance, the rule added some bite: an automatic loss of tax-exempt status for tax-exempt organizations which fail to file returns for three consecutive years.
The result is that a number of smaller tax-exempt organizations have since lost their tax-exempt status. And by a number, I mean a lot: I did a quick search and 21,548 organizations in Pennsylvania alone lost their status. All total, 551,068 organizations are currently on the list. You can search the IRS list of names of organizations which have lost their tax-exempt status using the IRSExempt Organizations Select Check tool.
Those organizations that have had their exemptions automatically revoked have to basically start from scratch in order to have their status reinstated. That includes filing a new application for exemption and paying the appropriate user fee.
It’s important to remember that loss of tax-exempt status can spell disaster for some organizations: not only does it mean that the organization must file income tax returns and pay tax but perhaps more importantly, it means that donors cannot take tax deductions for contributions. The ability to claim a deduction is often the motivation for individuals to make a charitable donation; without it, many potential donors may go elsewhere (or not give at all). That means it’s crucial to stay compliant.
To stay compliant, small tax-exempt organizations with annual gross receipts normally $50,000 or less are required to electronically submit federal form 990-N, also known as the e-Postcard, by the deadline (May 15). The organization is not required to file a form 990-N if it chooses to file a form 990 or form 990-EZ instead. Other exceptions include organizations that are included in a group return, churches and conventions or associations of churches.
Filing is super easy. Click on over to this site and log in or – if you’re new – register and file. And yes, despite the fact that it looks like a high school computer project, that’s the real site for filing the e-Postcard (you can start out here at IRS.gov and follow the links if starting at the e-Postcard site makes you nervous).
Here’s what you need on hand to file your e-Postcard:
- Employer identification number (EIN)
- Tax year (for most tax exempt orbs filing now, that’s 2013)
- Legal name and mailing address
- Any other names the organization uses
- Name and address of a principal officer
- Web site address if the organization has one
- Confirmation that the organization’s annual gross receipts are $50,000 or less
- If applicable, a statement that the organization has terminated or is terminating (going out of business)
You’ll need a bit more information – including your financials – to file a form 990 or form 990-EZ. If an organization has gross receipts less than $200,000 and total assets at the end of the year less than $500,000, it can file form 990-EZ (downloads as a pdf); some exceptions apply. If either gross receipts are greater than or equal to $200,000 or total assets are greater than or equal to $500,000, then the organization must file a form 990 (downloads as a pdf).
SOURCE: Tax Girl, Forbes