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Friday, April 30, 2010

IRS Reluctantly Planning Mass Tax Exemption Revocations

The Bottom Line: ALL Tax-Exempt Organizations Must File Tax Returns 

According to an article in The New York Times published on April 22, 2010, a staggering one-fourth of all nonprofit organizations will have their tax exemptions automatically revoked on May 15, 2010, based on their failure to file annual tax returns.  The IRS also has a page on their website devoted to this subject.

Historically, nonprofit organizations with $25,000 or less in revenues have been exempt from filing requirements.  However, the Pension Protection Act of 2006 increased reporting requirements.  Even tax-exempt organizations with no revenue at all are required to file an annual return.  Organizations that fail to file a return for three consecutive years will apparently have their exemptions revoked on May 15th, although the IRS may provide the organizations with a limited amount of time to correct the filing deficiencies.

Presumably, only small, volunteer-operated nonprofits that do not have accountants or lawyers will be struggling with this issue.  The filing burden for small organizations is not great, and it is not too late to correct the situation.

Click this link to download an article I wrote entitled “Your Comprehensive Guide to the New Form 990”.  You can also access the link by visiting CalSAE online and clicking the link on the home page.

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