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This Year’s Form 990 is a Very Big Deal

The filing deadline for the 2009 Form 990 is May 17, 2010 for 501(c)(3) and other tax-exempt organizations running on a calendar year basis.  There is nothing particularly new about that.  What IS new is that this year’s filing obligation has the potential to cause an enormous amount of heartache to those nonprofits that are unaware of the requirements and fail to do what is necessary.  We touched on this briefly in our last article, but we want to expand on it a little bit.  We implore all of our clients and friends to read this article carefully and be informed.

ALL tax-exempt organizations must file Form 990. With the distinct exception of churches, all 501(c) nonprofits are required to file a version of Form 990.  We’ve been saying this over and over, but we still find that the message is not quite getting through.  To make it easy to understand, ALL means ALL.  No exceptions!

In the past, only organizations averaging over $25,000 in annual revenue had to file Form 990.  Small nonprofits could get by without filing anything.  The rules changed in 2007 with the introduction of Form 990-N.  The first two years of the new requirement (2007 & 2008) were somewhat anti-climactic.  Although these smaller organizations were required to file Form 990-N, the IRS did not financially penalize those that did not file.  In fact, if the organization did not file by the extension deadline, they are not even allowed to file for 2007 or 2008.  This year, things will be very different.

Many nonprofits may lose 501(c) status this year. A provision of the new rules that has been overlooked by many is that failure to file Form 990 for three consecutive years will result in the revocation of the organization’s tax-exempt status…Boom!  Just like that.  And, if the organization in question is a larger organization required to file Form 990-EZ or Form 990, not only will their tax-exempt status be revoked, the organization will still be liable for huge financial penalties.  As we alluded to in our last post, we expect a lot of unpleasantly surprised executive directors and board members this year.

What about the financial penalties? When it comes to assessing penalties against nonprofits for late filing or failure to file Form 990, the price tag is steep:  $20 per day up to $10,000 or 5% of revenue (whichever is less) for organizations grossing under $100,000 or $100 per day up to $50,000 for those grossing over $100,000.  Definitely not chump-change.  In fact, it is enough to force the closure of many nonprofits.

Please take this seriously…get help. There is absolutely no reason for your nonprofit to be in the IRS cross-hairs.  Help is a phone call away.  We can assist you with any level of Form 990 filing requirement.  Our compliance department prepared over 300 returns last year.  We expect that to double this year, so it is a good idea to contact us soon.

For more information, see our Form 990 page.  We have created a Form 990 Calculator to help you assess your organization’s filing requirements.  Also, to the right of this page is a list of article topics.  Click on “Form 990” to bring up prior articles about this topic that will help round out your understanding.

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

This Post Has 2 Comments
  1. I have a tax number and my EIN number. I am currently working on getting my 5o1c3. It in not completely done. I had someone doing it for me who has previously been approved for theirs. They have slowed down in processing mine completely. I am however, still in the process of getting it done. I had no idea I had to file a form 990 until I just happen to read up on it. It was due in May I think. Am I in trouble and should I still file this form even tho theirs nothing to file yet.

    1. If you are not yet approved, you cannot lose what you do not have. If you have been operating prior to IRS approval, you will need to file Form 990 for that period(s). But, you are in no danger of revocations.

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