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Annual Federal Reporting and Filing Obligations of Tax Exempt Entities

Who Must File?

Virtually all tax exempt entities must file an annual return with the IRS. In fact, the presumption is that a tax exempt organization must file unless they fit into one of the IRS's limited exceptions. Several exemptions apply to certain religious organizations, political organizations, and others.

What Must be Filed?

There is no single form common to all tax exempt organizations, but all will file one of the "990-Series Return" forms, including Forms 990, 990-N, 990-EZ, or 990-PF. Supplemental information may be required through any one or more of Schedule A through R too. In general, tax exempt organizations incurring gross receipts less than $50,000 will file Form 990-N, also known as the "e-Postcard." Organizations that do not qualify to use Form 990-N, but who incur gross receipts less than $200,000 and have less than $500,000 in total assets may file either Form 990 or 990-EZ, while those with receipts or assets equal to or greater than the previously mentioned benchmarks must file Form 990. Finally, private foundations must file Form 990-PF regardless of financial status.

When Must Tax Exempt Entities File? What Happens if an Organization Files Late or Fails to File?

The deadline for filing your organization's 990-Series Return depends on the organization's fiscal year. Generally, your form is due no later than 5 months and 15 days after the organization's fiscal year ends. There are potentially significant penalties for organizations who fail to respect the IRS's filing deadline. An organization can expect to pay $20 a day for each day that the return is late. The same penalty applies to organizations who submit incomplete or incorrect information. Penalties are capped at the lesser of $10,000 or 5% of the organization's annual gross receipts. However, if the organization's gross receipts are over one $1 million, the penalty jumps to $100 a day up to a maximum of $50,000.

Further penalties may apply to organizations who file late, inaccurately, or not at all. The most significant of the additional penalties includes automatic revocation of tax exempt status. The most common reason for revocation is organizations' failure to file their return for three consecutive years. Organizations that lose their tax exempt status may no longer receive tax-deductible contributions and may face a corporate income tax requirement.

If you require any assistance meeting your filing obligations, please contact us.

Categories: Corporate Income Tax, Tax-Exempt Organizations

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focuses his practice in the areas of Michigan non-property tax disputes, business entity selection, corporate transactions, and information technology.

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