Tax News

CCH (cch.taxgroup.com) reports:

Answers to frequently asked questions (FAQs) received by the IRS about the new reporting requirements for small tax-exempt organizations are now available on the Service's website (http://www.irs.gov/charities/article/0,,id=173864,00.html). The IRS admits within these FAQs that some small tax-exempts have been confused over the new reporting requirements imposed by the Pension Protection Act of 2006 (PPA) (P.L.109-280) effective for tax years ending after December 31, 2006. It stated that the new FAQs were released to help clarify the new requirements. The FAQs review those circumstances in which small tax-exempts are required to use new electronic Form 990-N, Electronic Notice (e-Postcard) For Tax-Exempt Organizations Not Required To File Form 990 or 990-EZ, as well as the consequences of failing to file.
New Requirement
Small tax-exempt organizations, for purposes of the new filing requirements, are those tax-exempts with gross receipts of $25,000 or less. Ordinarily, these organizations are not required to file a Form 990, Return of Organization Exempt From Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax. However, subject to several exceptions, the PPA now requires them to file an electronic Form 990-N. The form must be filed electronically by the 15th day of the fifth month after the close of the organization's tax period. The IRS began mailing educational letters to over 650,000 small tax-exempts in July of this year to warn about this new requirement.
Exempt Status At Risk
The IRS warns small tax-exempts that the PPA
requires the Service to automatically revoke the tax-exempt status of any organization failing to meet its annual filing requirement for three consecutive years. Small tax-exempts may meet this requirement by filing the new Form 990-N or by filing either of the full-fledged Forms 990 or 990-EZ. The IRS further warns that failing to file under one of these options for three consecutive years will trigger the need for reinstatement of tax-exempt status. Reinstatement requires an application, as well as payment of user fees. The entity must make such application for reinstatement using Form 1024, Application For Exemption Under Section 501(a).
By Torie Cole, CCH News Staff