May 17, 2010

Not for Profit Tax Alert for Exempt Organizations Automatic Revocation of Tax-Exempt Status for Failure to File Annual Return or Notice May 17, 2010 Filing Deadline

Holland & Knight Alert
Tom Kinasz

Every year, organizations that are exempt from federal income tax must file a tax return with the IRS. This is true regardless of the level of revenues that the organization receives. If an exempt organization does not file a return for three consecutive years, it will lose its federal tax exemption. (Previously, the only penalty was a monetary penalty, however, the law now provides for a loss of exemption.) The penalty applies to organizations that fail to file Form 990, Form 990-EZ, or Form 990-PF, as well as the new Form 990-N (Form 990-N must be filed by tax-exempt organizations whose revenues normally fall below $25,000).

Once the 2010 filing deadline passes for an exempt organization (May 17, 2010, for tax-exempt organizations with calendar fiscal years), organizations that have failed to file their Form 990s for three or more consecutive years will automatically lose their tax-exempt status. While the due date for calendar year 2009 returns is May 17, 2010, an extension of time can be obtained if IRS Form 8868 is submitted to the IRS on or before the filing due date.

Therefore, it is crucial that tax-exempt organizations that may have failed to file an annual return for the past three years do so by May 17, 2010, (or file for an extension of time) to avoid automatic loss of their tax-exempt status.

For additional details, you can review the FAQs from the IRS and visit the IRS website.

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