IRS Announces Relief of New Filing Requirements for Charitable Organizations

The IRS has been pushing for more transparency and accountability when it comes to the fiscal matters of 501 (c) (3) charitable organizations. Nobody argues that the idea is admirable and desirable, but like many IRS policies and procedures they can go overboard. One of the most controversial moves the IRS has made under the Pension Protection Act of 2006 (PPA), is to expand the number of organizations that have to file the very lengthy Form 990 better known as charities informational return.

Well, the PPA gave charities based upon their size a mandate to file some form of the Form 990 (990, 990-EZ or the 990-N) by May 16, 2010. However bu IRS estimates, about 25% of the one million plus charities failed to file, and therefore technically have lost their tax exempt status. Not only does this impact the charities, but also the charities\’ donors\’ tax returns as charitable donations to those organizations are not tax deductible.

The solution, at least temporarily, came in IRS Reg 2010-87 which gave mid size and small charities till October 15, 2010 to file.  The smaller charities with receipts of less than $25,000 for one year are even given the chance to file the Form 990-N which is an epostcard that can be done on line.

This is a huge second chance for those organizations who have not filed.  Failure to file will result in having the charity lose their exempt status and if they want to get it back they will have to once again file a Form 1023 with a $850 filing fee and begin the lengthy process of getting the tax exempt status back.

By far the easiest action item is to make sure that if you are on a board of a charitable organization, make sure it has filed and if not, use this as your second chance.

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