990 Penalties & How To Avoid Them

The main questions the Express990 Team receives are almost always about penalties. When it comes to 990 penalties, things get a little tricky. But don’t you worry, I will explain them in detail and how you can avoid them or reinstate your tax exempt status.

Incomplete Returns
If you file an incomplete return, say you didn’t fully complete a certain schedule on your 990-EZ, the IRS will contact you to notify you of the problem.

Late Filing Penalty
Late filing penalties are completely avoidable. First know, if you need more time you can e-file Tax Extension Form 8868 for an automatic 3-month deadline extension. Form 8868 can save you from having to pay hefty late filing penalties. The IRS states:
“If an organization whose gross receipts are less than $1,000,000 for its tax year and 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%, 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.”

  • Note there is no penalty assessed for late filing of the 990-N (e-postcard). If you do not file your 990-N, the IRS should send you a reminder notice. If you do not file your 990-N for three consecutive years, your tax exempt status will be automatically revoked. 
Reinstating Tax Exempt Status
If you have found out your tax exempt status has been revoked, you will need to contact the IRS. For most cases the IRS can reinstate your status over the phone, or they will let you know what you need to do. The IRS publishes an Automatic Revocation of Exemption List that has the names of organizations whose tax exempt status has been revoked so you can know for sure where your status stands. 
The best way to avoid 990 penalties is to file by your deadline. Your 990 deadline will be determined by what type of tax year you follow; Fiscal or Calendar. If you have any questions about e-filing your 990 or Form 8868 (application for extension of time to file an exempt organization return) don’t hesitate to contact the Express990 team via phone: 704-839-2321 or email: [email protected]
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