Not-for-profit Tax Returns

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Mandatory E-filing for Not-For-Profit Tax Returns and Failure to File Notification

By: Chris Anderson, CPA

Not-for-profit Tax Returns by Chris Anderson, CPA

Chris Anderson, Maloney + Novotny

The Taxpayer First Act of 2019, recently signed into law by President Trump, contained 2 important provisions for not-for-profit organizations that are required to file returns in the Form 990 series:  mandatory e-filing for not-for-profit tax returns and notice from the IRS when an organization fails to file a return.

Mandatory E-Filing:

For tax years beginning after July 1, 2019, the e-filing requirement applies to all tax-exempt organizations required to file returns in the IRS Form 990 Series (Form 990-N, 990-EZ, 990, and 990-PF).  Prior to this law change, e-filing was only required for Form 990 if the tax-exempt organization had $10 million in assets and filed 250 tax returns (including Forms W-2 and 1099).  Note that Form 990-N has always been an online-only filing, and Form 990-EZ can only be filed by organizations with less than $500,000 in assets and $200,000 in revenue.  Form 990-PF previously had to be filed electronically with the IRS only if the private foundation had filed at least 250 tax returns during the calendar year.  Presumably, Form 990-T is not included in this new law because the IRS has yet to allow its computer systems to accept more than 1 e-filed return (e.g., Form 990 and Form 990-T) from the same taxpayer.

Maloney + Novotny strives to e-file all not-for-profit tax returns in the Form 990 series whenever possible, so we do not anticipate that this law change will have a significant impact for our clients.

IRS Notice of Failure to File:

The Act also requires the IRS to provide notice to an organization that fails to file a Form 990 series return for 2 consecutive years.  This provision applies to failures to file not-for-profit tax returns for 2 consecutive years if the return for the second year is required to be filed after December 31, 2019.  Congress has directed the IRS to include in the notice an explanation of how to comply with the annual tax return filing requirements.  Under existing law, a tax-exempt organization that fails to file a return in the Form 990 series for 3 consecutive years automatically loses its tax-exempt status.  This new notice from the IRS will likely help organizations that have not filed tax returns to do so before the third year so that loss of exempt status will not occur.

Please contact Chris Anderson at canderson@maloneynovotny.com or 216-344-5268 for questions and details about filing not-for-profit tax returns, failure to file notices, or an other not-for-profit tax matters.

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