Form 990-EZ for 501(c)(3)(6) Organization

[eapat]

I'm hoping someone with non-profit experience can help out. A potential client contacted me about filing their 990-EZ. They filed their initial 990-EZ for the tax year ending 12/31/10 and have not filed for 2011 or 2012. The treasurer of the organization claims the attorney who helped them set up LLC told them they need to file every two years after the initial filing. Not sure if he misunderstood or I'm missing something. Everything I have found says an annual return is needed. Their gross receipts have been less $50,000 a year so they qualify to file a 990-N instead of the 990-EZ. Can they still file the 990-N even if the returns are past due?


Thanks.

[dortar]

Please note:  I am not a tax professional (but my place of business has a CPA on staff!).  I encountered a similar situation with an organization for which I was tapped to serve as volunteer treasurer, and the on-staff CPA had encountered the same situation with a different organization a few years prior to that.  In his situation, he filed the forms for the previous years along with a cover letter stating that the "volunteer" organization had neglected to file the forms due to the lack of a trained person in the treasurer's position.  He filed both federal and state level returns and sent  tax payments if they were needed.  I followed the same path for the organization I served.  Neither of us received any negative follow-up nor fines.  These events occurred in the early 2000's, so I don't know which tax rules have changed since that time.

[mwcpa]

an LLC treated as a non profit organization, that is a first for me....never have seen that...

here is a link to the 990 "rules".... www.irs.gov/Charities-&-Non-Profits (there is a lot there).  Most non profits MUST file a form in the 990 series (990N, 990EZ or 990) annually.  The law specifically excludes certain organizations... there is no file every couple of year rule....

"Most tax-exempt organizations are required to file an annual return or notice with the Internal Revenue Service" www.irs.gov/Charities-&-Non-Profits/Automatic-Revocation-of-Exemption further "Section 6033(j) of the Internal Revenue Code automatically revokes the exemption of any organization that fails to satisfy its filing requirement for three consecutive years"

"Can the IRS “undo” my organization’s automatic revocation?
No. If an organization does not file an annual return or notice for three consecutive years, the organization is automatically revoked by operation of law, and not by a determination made by the IRS. To have its tax-exempt status reinstated, the organization must file an application for exemption. An organization may also request retroactive reinstatement as part of its application"  www.irs.gov/Charities-&-Non-Profits/Automatic-Exemption-Revocation-for-Non-Filing:-IRS-Cannot-Restore-Status

I suggest that a 990EZ be filed for the missing years.  More than likely the IRS will issue a failure to file timely penalty, but that can be appealed.  In my experience IRS will not accept the my attorney told me I did not need to file and will note that it is the responsibility of the board of directors to know the legal requirements of the not for profit status granted.  (Maybe if the "you do not need to file" statement is in writing from the lawyer this may help minimize the statutory fines)

I would suggest that the board ensure that they have their "board insurance" paid up to date.  I would suggest getting a new lawyer asap.

What state are they in, as states have requirements too.... New York has a registration and annual filing requirement if you solicit funds (AG), California has a number of registration requirements (with the AG and FTB).

It is the responsibility of the board of directors to know the law and requirements which is why if one accepts a board appointment they had better get educated.

[taxref]

MWCPA is correct that tax exempts must file the appropriate 990 form each year.   Either the attorney was incorrect, or the treasurer misunderstood.

[eapat]

Thanks to everyone for the replies. I received a copy of an email the attorney sent to the treasurer and it said “We actually didn’t file anything in 2011 because as a tax exempt organization, you only have to file every three years to keep your tax exempt status.” Hopefully the IRS will take pity on the organization for relying on this faulty advice and waive the penalty.

[mwcpa]

The document in writing may be helpful to minimize the penalties, but do not count on it working to get the fine reduced.  But, this writing should be able to help the organization be made whole for the incorrect information being shared by the attorney.... clear case of malpractice, in my opinion...

In any event they should catch up the 990 filings asap now that they know the law.