During yesterday’s IRS Stakeholder Relations meeting, we were treated to some information from Joyce Hoover, IRS’s Exempt Organization Group’s Senior Technical Advisor. She’s been working with exempt organizations for about 19 years…so she’s lived through the history and development of this department.
Some of the highlights from yesterday.
We all know there is a new postcard-type Form 990 that smaller organizations must file each year. You can find it online. It is the Form 990-N. For 2011, the gross receipts limit rises to $50,000 from $25,000 in 2010.
What most people don’t seem to realize is – regardless of the level of gross receipts an organization generates, or doesn’t – each organization must file some report each and every year. Whether it’s the postcard or a full Form 990, if they want to keep their non-profit status, something must be filed.
What happens if you don’t file?
Any organization that fails to file some version of Form 990 for three years will lose its exempt status. IRS will make this automatic immediately upon the due date for the third year’s report.
Once the exempt status is terminated, three bad things happen:
- All income of the organization is fully taxable and must be reported on a corporate tax return (if they have incorporated).
- All the donors lose the charitable contribution for their donations, starting with the date the exempt status is terminated.
- The organization will appear on IRS’s list of suspended non-profits.
Folks, this is not a difficult requirement to maintain. If you have an inactive organization, just be sure to file the postcard each year – even if you file it late. After all, you have a three-year cushion.
When you have an active organization, there is no excuse for not keeping proper books and records, is there?
(OK, if you blow it, there is a one-time filing relief…)
Three more tidbits.
- Exempt Orgs are entitled to the Health Care tax credit for paying employees’ health insurance.
- There are lots of online training resources on the IRS/EO website.
- The Stay Exempt website has a case study to walk you through setting up an exempt org.