Thursday, May 1, 2008

IRS to Offer Amnesty Program for Late Form 990 Filers

The Chronicle of Philanthropy reports the IRS plans to introduce an amnesty program later this year for tax-exempt organizations that otherwise could lose their exempt status for failing to file the required information return, the Form 990 or Form 990-EZ.  The article states that the program is a response to the new requirement, enacted as part of the Pension Protection Act of 2006, that revokes the tax-exempt status of any organization that fails the required return for three consecutive years.  This new requirement is codified at section 6033(j) of the Internal Revenue Code and is effective for returns for years beginning after 2006. 

The program will permit tax-exempt organizations to file their late forms without penalty upon the payment of a small fee based on their size.  Late filing penalties accumulate at a rate of $20 per day up to a maximum of $10,000 per return for smaller organizations, while organizations with annual gross receipts of more than $1 million face penalties of $100 per day up to $50,000 per return.  The IRS can abate the penalties if the organization has a reasonable cause for its failure to file. 

Jason Kall, manager of the IRS' Exempt Organizations Compliance Strategies and Critical Initiatives group, is cited in the article as saying that the key to the program's success will be informing tax-exempt organizations about their filing obligations and the new revocation rule.  The IRS found in a 2006 study that in almost one-quarter of the cases where an organization did not file a required return the person responsible for the organization's books and records was simply unaware of the filing obligation.

The article does not state whether the program will also extend to the Form 990-PF filed by private foundations and to the new Form 990-N electronic notice that must be filed by small tax-exempt organizations that fall at or below the $25,000 in annual gross receipts threshold for having to file Form 990 or Form 990-PF.  The latter notice is only required for tax years ending on or after December 31, 2007 and is further described on the IRS website.  The new revocation provision also applies to these filings, so hopefully the program will encompass them as well.

LHM

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