Ouch: 275,000 Nonprofits Lose Exemption
For anyone who doubted that the IRS means business when it requires tax-exempt nonprofit organizations to file annual Form 990s (at least in e-postcard form, for the smaller organizations), its June 8th announcement should serve as a wakeup call. Tax-exempt status was revoked for a whopping 275,000 organizations, all of which had failed to file the required paperwork for the last three years.
The IRS even published a list of the organization’s names, at http://www.irs.gov/charities/article/0,,id=240099,00.html.
Some of the groups on this list may simply have been defunct. Some, such as local garden clubs, may have discovered that receiving donations wasn’t high on their list of needs or activities, so that tax-exempt status wasn’t worth the effort.
But it’s likely that other groups didn’t understand that the requirements applied to them, due to changes in the reporting requirements over the last few years. For a full summary of these reporting requirements, see Nolo’s article, “Many Nonprofits Must File IRS Form 990-N to Stay Tax-Exempt.”
And for help complying with these and other requirements of keeping your nonprofit’s tax exempt status, see Every Nonprofit’s Tax Guide, by Stephen Fishman (Nolo).
One comment
The IRS is offering transitional relief for small revoked groups. It’s one of the best deals I’ve seen in my four decades of professional involvement with non-profit taxes. If you can honestly say there is still a need for your non-profit, and you feel you can muster the human and other resources needed to sustain it, don’t pass up this opportunity to regain your tax exempt status.
There are no shortcuts. You will have to fill out a new exemption application and pay an IRS User Fee. But for organizations with annual gross receipts normally less than $50,000, the User Fee will be reduced to only $100 and reinstatement will be retroactive. The offer is only good through December 31, 2012. You can find the details at http://www.irs.gov/pub/irs-drop/n-11-43.pdf.