A number of small nonprofit organizations are at risk of losing their tax-exempt status because they failed to file required returns for 2007, 2008 and 2009.
However, the IRS announced this week that those organizations may preserve their status by filing returns by Oct. 15, 2010, under a one-time relief program.
The IRS has posted a list of names and last-known addresses of these at-risk organizations.
The list, which was generated on June 30, 2010, includes only organizations with an annual filing requirement. The list may be incomplete; therefore, certain organizations may be at risk of automatic revocation even if their names do not appear on these lists, including the following:
- Subordinates in group rulings for which the parent has not filed a required group return
- Very small section 501(c)(3) public charities not required to file an application for exemption
- Other section 501(c) organizations not required to file an application for exemption.
These organizations should check their records and determine whether they are at risk of automatic revocation because they have not satisfied annual filing requirements.
Two types of relief are available for small exempt organizations:
- A filing extension for the smallest organizations required to file Form 990-N, Electronic Notice
Small organizations required to file Form 990-N simply need to go to the IRS website, supply the eight information items called for on the form, and electronically file it by Oct. 15. That will bring them back into compliance.
- A voluntary compliance program (VCP) for small organizations eligible to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax
Under the VCP, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by Oct. 15 and pay a compliance fee. Details about the VCP are on the IRS website. The compliance fee ranges from $100 to $500 depending on the size of the organization.
NOTE: The relief is not available to larger organizations required to file the Form 990 or to private foundations that file the Form 990-PF.
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.
Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.
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