For years, most small tax-exempt organizations were exempt from filing requirements with IRS. This all changed a few years back when The Pension Protection Act of 2006 made it mandatory for tax-exempt organizations 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. The new rule was pretty much ignored beginning that same year.
To “encourage” compliance, the rule also imposed an automatic loss of tax-exempt status for tax-exempt organizations which failed to file returns for three consecutive year. The result was a bit of a bloodletting in 2010, which marked the third year after the rule took effect.
The IRS scrambled a bit to help out tax-exempts which hadn’t filed on time, offering extensions and making a real effort to get the word out. Tens of thousands of charities had not complied by the ever important 2010 deadline, so the IRS ramped up notices and the like.
And then… crickets.
After a flurry of activity, many tax-exempts have forgotten about the forms and are now staring down the possibility of loss of status for filing to remain compliant with respect to reporting.
I know, I know. You can’t baby taxpayers.
But I’ve represented a lot of tax-exempt organizations. And it’s tough to stay compliant especially with very small organizations that don’t have a budget for tax pros and especially with organizations in transition (meaning, specifically, those run by volunteers who may rotate through a treasurer every couple of years).
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.
For most tax-exempt organizations, the key date is May 15. That’s the filing deadline this year for calendar year tax-exempt organizations (otherwise, it’s the 15th day of the fifth month following the close of the tax year).
Small tax-exempt organizations whose annual gross receipts are normally $50,000 or less for 2011 are required to electronically submit federal form 990-N, also known as the e-Postcard, unless they choose to file a complete Form 990 or Form 990-EZ instead (there’s nothing that says you can’t file the longer returns if you want to).
If you don’t file the e-Postcard on time, the IRS will initially send you a reminder notice. But nobody wants that. It just sends the organization into a panic.
Filing is super easy. Click on over to this site and log in or – if you’re new – register and file. And yes, the site looks terrible. Clearly, the Urban Institute didn’t put all of its dollars into design work… But 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 it makes you nervous).
—
Want more taxgirl goodness? Sign up to receive posts by email, follow me on twitter (@taxgirl), hang out with me on Facebook, pin something to my Pinterest board or check out my new YouTube channel.