May can be a risky month for calendar year nonprofit organizations. Why? Because annual returns for nonprofits with a December 31 year-end are due in mid May (the due date is Monday, May 16, this year). Missing the due date three years in a row means automatic revocation of your tax-exempt status.
The revocation is effective on the due date of the third-year return and the consequences are severe. For starters, donors will no longer be able to deduct contributions to your organization. You’ll also have to file a federal tax return, such as Form 1120, U.S. Corporation Income Tax Return, and pay any tax due.
In addition, getting your tax-exempt status reinstated after an automatic revocation means you need to file an application for exemption and pay a user fee. That’s true even if your organization was not originally required to file for exemption. You can request retroactive reinstatement by attaching a letter to the application and explaining why the required returns weren’t filed. Just remember you must have reasonable cause for nonfiling. That means you must have exercised ordinary business care and prudence over the entire three-year period but were still unable to file your return.
How can you avoid all this trouble? The good news is that filing might be easier than you think. A nonprofit with annual gross receipts of $50,000 or less can file Form 990-N, known as the “e-Postcard.” Form 990-N has eight questions and is filed electronically. Nonprofits with gross receipts of less than $200,000 and assets under $500,000 can use Form 990-EZ. Larger organizations must use the standard Form 990. If your nonprofit runs a business to help raise funds, you may also need to file Form 990-T to report and pay tax on income from those sales.
Need more information on filing requirements for your nonprofit? Contact us — before May 16
Dye and Whitcomb CPAs have a long history of assisting non-profit organizations with their financial accounting.
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