Late Filing 990-N, What’s the Big Deal?

Tax-exempt organizations with gross receipts that are normally less than $50,000 are spared the administrative burden and expense of filing a full Form 990.  Instead, organizations small enough to be below this filing threshold are allowed to complete their annual tax filing by submitting an electronic tax form, Form 990-N, commonly referred to as the e-postcard.  Filing an e-postcard is very easy and can be done in as little as five minutes by registering online and answering a few simple questions.  It is important to note that failing to submit Form 990-N for three consecutive years will result in the IRS automatically revoking your organization’s tax-exempt status.

But what happens if you do not submit the e-postcard for a single particular year?  Can you just file for the current year and move on?  Well, as it turns out, it is not that simple (and when is anything simple when it comes to the IRS?).  Failing to file a Form 990-N will likely result in your organization receiving a notice from the IRS indicating they do not have a record of your prior year tax filing.  The notice will likely include some alarming language urging you to file the delinquent year’s tax form as soon as possible or else the IRS could take action.

Fortunately, there are no tax penalties for late filing a 990-N.  However, the notice should not be ignored.  For one thing, even if you ignore it and file the current year form, the IRS will persistently continue to send you notices indefinitely until the matter is resolved.  Moreover, you could subject your organization to having its exempt status revoked.

Unfortunately, there is no way to late file a 990-N through the IRS.  The IRS website mentioned above only allows 990-N filings for the most recently completed fiscal year. In other words, you cannot file a 12/31/11 Form 990-N after 12/31/12.  The IRS website has links to third-party websites that will enable you to file a late 990-N; but, you typically have to register for those sites and pay a transmission fee.  The best and cheapest way to stop the notices and get your organization back into good standing with the IRS is to respond to the notice either in writing or by phone (there will be an appropriate phone number to call on the notice).  All you should have to do is explain to the IRS representative that your organization still exists and has or will file a 990-N for the current tax period.

It is very important that all tax-exempt organizations complete their annual tax filings with the IRS in a timely manner.  If your organization’s exemption status is automatically revoked by the IRS it will be necessary to apply for reinstatement.  Such a process can be very time consuming and expensive in terms of both accounting and legal fees as a new Form 1023 must be filed with the applicable application fee.

For more information on annual tax filings for tax-exempt organizations, or help with responding to a notice for a late 990-N, please contact your BNN tax accountant.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.