If there is one constant in life, it’s change. And most people don’t do “change” very well…even the IRS! The new 2008 Form 990 is a complete, top-to-bottom overhaul of the form (as we’ve discussed in previous posts). As we talk with more and more clients/prospects, we’re really starting to see some trends develop…most of them not good.
Denial
The most common issue we’re seeing is denial…denial on the part of both charities and tax practitioners. On the charity side, we have encountered everything from “It’s no big deal!” to “My CPA says it’s no big deal” to “Form 990? What’s a Form 990?”. Scarily, we’re hearing similar refrains from practioners. Not so much the “What’s a Form 990?”, but plenty of the “It’s no big deal.”. We’ve got a news flash for charities: It’s a very big deal.
Sudden Realization
We got this from a new client last week: “Funny I should get a solicitation from you today. My accountant just called me yesterday to “take back” his price quote on preparing my Form 990. He got a look at the changes and decided he quoted me too low.”
IRS Mistakes
This is probably the most frustrating of all for everyone. It seems the main IRS Exempt Organizations office in Cincinnati is dispensing bad telephone advice. Within the past week, we’ve had multiple clients tell us they were instructed by an IRS phone representative to file a Form 1120 (corporate, for-profit tax return) if they don’t have 501(c)(3) status yet (WRONG!). The Form 990-N filing that was created for the 2007 tax year is causing problems, too. The instructions for Form 990-N clearly state that nonprofit organizations that plan to seek 501(c)(3) status, or have an application pending, must file Form 990/990EZ/990-N. But, the online filing system for Form 990-N is not equipped to handle organizations that haven’t at least filed their 501(c)(3) application. The work-around is for the organization to call Cincinnati and “pre-register” by phone, then wait 45 days and file Form 990-N. But just last Friday, a client informed us that the telephone agent made the executive decision to register them as a 501(c)(7) instead of a 3, based on the phone rep’s interpretation of the organization’s purpose. It remains to be seen what nightmare that has created.
All in all, it looks like it’s going to be a fun filing season!
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I am working with a group (church) who received their 501c3 status in 2002 and the last letter was received in 2004 stating that they will be treated as public charity. It is my understanding that they never moved forward with and programs, organizational development or even opened a checking account. However, would like to activated, organize and move forward. What would you advise or suggest.
Hard to say without knowing more. Churches cannot lose their tax exemption due to non-filing of Form 990 like other nonprofits do because churches don't file Form 990. Unless the corporation has been dissolved at the state level, everything may be good to go.