Filing Requirements For Tax-Exempt Organizations

Posted on Mon, Oct 29, 2012 ©2021 Drucker & Scaccetti

Top Tax Issues Facing Charities: PART I

The Grim Tax Reaper Cometh and Taketh Thy Tax-Exempt Status

Today we begin a three-part series of posts where we will discuss the current top tax issues facing charitable organizations.  Today, in Part I, we will focus on filing requirements for tax-exempt organizations and what could happen if your organization does not comply.  Since its just a few days before Halloween, we found the title of this post appropriately spooky.  Come to think of it, if you need a last minute costume idea, how about dressing your child as an IRS agent?  When they come knocking at your door, you should be scared...and call the Tax Warriors immediately!


Although exempt from federal income tax, tax-exempt organizations still have an annual information return filing requirement.  Your charity will be required to file Form 990, Form 990-EZ, or Form 990-N (e-Postcard) depending upon its annual gross receipts and/or amount of total assets.  Private foundations are required to file Form 990-PF regardless of income level or total assets. Failure to comply with these filing requirements for three consecutive years will result in the automatic revocation of an organization’s exemption.  Once an organization’s tax-exempt status is revoked, it is placed on the IRS’s Automatic Revocation List, which serves as a notice to donors that these organizations are no longer eligible to receive tax-deductible contributions.


If your organization has had its tax-exempt status revoked, and it would like to have it reinstated, an Application for Recognition of Exemption must be filed with the IRS along with the appropriate user fee.  The IRS will then review the new application and determine if the organization qualifies for tax-exempt status. 


In certain limited circumstances, the IRS will grant retroactive tax-exempt status back to the date of the automatic revocation, but in most cases, the effective date of the new exemption will be the date that the organization submitted the application with the IRS.  This means that any contributions received in the interim will not be deductible by the donor, and will be taxable to the organization.


If your charity is included on the Automatic Revocation List, but it has met the annual filing requirements for the years in question, you may send documentation as evidence to the IRS’s Tax Exempt and Government Entities Division in order to have the organization removed from the list.


There is some relief for small organizations with gross receipts that did not exceed $50,000 in the most recently completed tax year.  Many of these organizations lost their exempt status due to a failure to file Form 990-N for 2007, 2008, and 2009.  If this applies to your charity, it is possible to have your exemption retroactively reinstated to the date of revocation if your charity meets the following criteria:


  1. The organization was not required to file Form 990 or 990-EZ in years prior to 2007.
  2. The organization was eligible to file Form 990-N (e-Postcard) during 2007, 2008, and 2009.  To qualify, its average annual gross receipts could not be more than $25,000 during these years.


If both of the criteria above apply to your charity, an application for reinstatement of tax-exempt status must be submitted on or before December 31, 2012, with the IRS in order to have your exemption reinstated.


If you would like more information regarding compliance or automatic revocation, click on “Ask a Tax Warrior” below or visit our Consulting & Compliance for Exempt Organizations services page.


Stay tuned!  Later this week we will discuss written donor acknowledgement requirements for charities and substantiation requirements for taxpayers.


Topics: Taxation, Tax-exempt, Foundations, Charirites, tax-exempt status, Tax experts, IRS

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