Publications

Form 990 Processing Changes – Nonprofit Filers Beware!

4/2/2018 Articles

The May 15, 2018 filing due date for the Form 990 for tax-exempt organizations operating on a calendar year is just around the corner.  Organizations may file Form 8868, Application for Automatic Extension of Time to File an Exempt Organization Return, in order to receive an automatic 6-month extension of time to file their Form 990 (https://www.irs.gov/pub/irs-pdf/f8868.pdf).

Whether the Form 990 is filed by the May 15th due date or the extension due date (November 15th),  it is important to note that the IRS has instituted new automated processing changes that involve returning the Form 990 when it is incomplete or the wrong return is filed, accompanied by specific letters indicating the nature of the organization’s noncompliance. 

If your organization fails to file its return by the due date, it must pay a penalty of $20 per day for each day the return is late; the same penalty applies if the organization does not give all of the information required by the return or gives incorrect information.  The maximum penalty for failure to file a return is the lesser of $10,000 or 5% of the organization’s gross receipts, but if an organization has gross receipts of over $1 million for the year, the penalty is $100 per day up to a maximum of $50,000.

If your organization’s return as filed is incomplete or the wrong return for the organization, the IRS will send it back to the organization with a letter indicating what is missing or misfiled.  In order to avoid penalties after receipt of one of these letters, within the time period requested by the IRS letter, the organization must: 1) provide the missing or incomplete information, or proceed to file the complete and accurate return and sign the return, 2) attach a copy of the IRS’s letter, and 3)  include a written “reasonable cause” explanation of why the organization did not initially provide both the missing or incomplete information.

“Reasonable cause” is a facts-and-circumstances determination that is made by the IRS on a case-by-case basis.  The law relevant to this area provides that the explanation must be made by the appropriate person under penalties of perjury, and must set forth all of the facts supporting a determination that the noncompliance was due to reasonable cause.  Further, the organization should submit any available supporting documentation to address how the organization exercised ordinary business care and prudence (or, in other words, how the organization was not neglectful or careless), along with what steps the organization has taken to prevent the same situation from occurring again in the future.

For example, a public charity operated for years with gross receipts substantially below the Form 990-EZ threshold amount, making it eligible to file and thus filing Form 990-EZ for those years.  However, the organization had $350,000 in gross receipts in 2017.  Mistakenly, it files a paper Form 990-EZ return for the 2017 tax year and the return is rejected by the IRS.  The organization would need to then file the appropriate full Form 990 return and submit an explanation as to why this mistake was made and how the organization has taken steps to ensure this will not happen again in the future in order to avoid penalties.  

For more information related to processing changes, common errors on Form 990, or penalties for failure to file your Form 990, additional information is available on the IRS website.

Firm Highlights

Publication

REFRESH Nonprofit Basics: Election Year Issues for Private Foundations and Public Charities - Private Foundation Advocacy

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . Here we are, solidly in the 2024 election year, and that means that private foundations need to refresh their understanding of election year...

Read More
Publication

Nonprofit Basics: Unpacking Prudent Investments, PRIs and MRIs

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . Episode 73 discusses frequently used terms in the nonprofit world pertaining to investment activities. Public charity and private foundation directors and officers need...

Read More
Publication

Charitable Planning With Guest Stephanie Hood: Navigating Complex Rules and Traps for the Unwary

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . This week, I am delighted to have Stephanie Hood return as my guest. Stephanie is my colleague at Farella Braun + Martel and...

Read More
Publication

Employment Law Update for Nonprofits With Holly Sutton

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . Charities, foundations, and their founders often request help addressing employment practices and compliance questions. In this episode, host Cynthia Rowland is joined by Holly...

Read More
Publication

Nonprofit Basics: Scholarship Grant Program IRS Approval Requirements

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . Today’s episode focuses on IRC Section 4945(g), which provides an exception for grants to individuals so that the penalty taxes for such grants...

Read More
Publication

Corporate Transparency Act: A Guide on Beneficial Ownership for Nonprofit Executives

The Corporate Transparency Act, enacted as part of the National Defense Authorization Act for Fiscal Year 2021, represents a significant shift in regulatory requirements for entities across the United States. This act, set to...

Read More
Publication

REFRESH Nonprofit Basics: Election Year Issues for Private Foundations and Public Charities - Legislative Lobbying and Advocacy Rules for Public Charities

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . As most listeners are undoubtedly aware, 2024 is an election year, and that means that charities and private foundations need to refresh their understanding...

Read More
Publication

Nonprofit Quick Tip: State Filings in Florida and Louisiana

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . This is the ninth in a series of “Quick Tip” episodes focusing on the details of state registration of nonprofit corporations. In previous...

Read More
Publication

Nonprofit Quick Tip: State Filings in Rhode Island and New Hampshire

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . This is the eighth in a series of “Quick Tip” episodes focusing on the details of state registration of nonprofit corporations. With the help...

Read More
Publication

Nonprofit Quick Tip: State Filings in North Carolina and South Carolina

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . Episode 75 is the tenth in a series of Quick Tip episodes focusing on the details of state registration of nonprofit corporations. With...

Read More