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ExpressTaxExempt Blog

Thursday, July 31, 2014

Tax Tips To Avoid Late Filing Penalties For Form 990-EZ

Unfortunately, just like the 990-N, there’s no sure-fire way avoid IRS penalties for late filing the 990-EZ, except filing on time. In order to understand the gravity of this situation, let’s look at what the penalties could be if you fail to file:

“If an organization whose gross receipts are less than $1,000,000 for its tax year files its Form 990 after the due date (including any extensions), and the organization doesn't provide reasonable cause for filing late, the Internal Revenue Service will impose a penalty of $20 per day for each day the return is late. The maximum penalty is $10,000, or 5 percent of the organization's gross receipts, whichever is less. The penalty increases to $100 per day, up to a maximum of $50,000, for an organization whose gross receipts exceed $1,000,000.
  • “An organization that fails to file the required information return (Form 990, Form 990-EZ, or Form 990-PF) or e-Postcard (Form 990-N) for three consecutive tax years will automatically lose its tax-exempt status.”
That’s a hefty payment for a tax-exempt organization and losing your exempt status is no joke. You can make filing your 990-EZ less...dare we say it...taxing by having all of your information ready before you begin filing. Nothing ratchets up the stress meter like a fast-approaching deadline and not being able to find the address of a big contributor.

We also recommend making this a group effort: have those in your organization that know it best to divide the work between the, based on who is better at what. Assign fundraising events to whoever puts together your events. Give the donor list section to the person who knows your biggest donors best. Let the public relations officer handle the explanation of the organization’s exempt purpose. Long story short, “teamwork makes the dream work.”

You can avoid pesky and potentially organization-ending IRS penalties by filing in a timely manner, filing a Form 8868, Extension of Time to File, or adding an explanation as to why you’re filing late. The IRS will assess penalties on a case-by-case basis given an adequate explanation can be produced. In any case, being proactive can reduce your stress and keep you out of hot water, so file with Express990.com and stop letting those taxes get to you.

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