Steep Penalties

Tax Update: If you filed Part I of an Exempt Organization Extension Form 8868, your extended deadline of August 15 is coming up soon – next week, to be exact.

You must be ready to file your Form 990 or Form 990-EZ by then or you could incur some pretty steep penalties from the IRS. “How steep,” you may ask? Some are as much as $50,000 for tax-exempt organizations that have revenues of $1 million or $10,000 for organizations with revenues less than $1 million. These penalties may be charged for either a late return, an incomplete return, or both.

Penalties: As mentioned earlier, penalties are usually based on your organization’s gross receipts. If your organization has gross receipts of less than $1 million, and you have no reasonable cause for filing late, the IRS may impose a charge of $20 for each day your return is late. Your max penalty charge climbs up to $10,000, or 5% of your total gross receipt – whichever amount is less.

For tax-exempt organizations with revenues of $1 million or more, your max charge reaches up to $50,000, and the IRS may charge you $100 for each day your return is late.

Redemption: If for some reason, even after filing an extension, you still have to file late, all hope is not lost. Code Section 6652(c)(3) states that penalties due to late filing may be waived if you can prove “reasonable cause.” As such, the IRS may consider waiving the penalty, but not the interest that has incurred.

To prove your reasonable cause, the request must be a written statement that includes a declaration by an officer or director that the statement is being made under penalties of perjury. Your statement must have all the facts regarding what kept your organization from filing its return on time. This can include

  • What prevented the organization from requesting an extension of time to file its return if an extension was not requested
  • How your organization was not neglectful or careless, but exercised ordinary business care and prudence
  • What steps have been taken to prevent the same situation from occurring in the future

Your statement needs to be attached to your Form 990 or 990-EZ along with any necessary documents. Your request could also be submitted as a response to a penalty notice.

Avoid filing late and dealing with IRS penalties by e-filing your Form 990 or 990-EZ with Express990. We work closely with the IRS in order to provide you with a safe, secure, and accurate e-filing process that will save you time and money.

For professional assistance with e-filing a Form 990, contact the live experts at our Rock Hill, South Carolina, headquarters by phone (704-839-2321, Monday through Friday from 9am to 6pm EST), email ([email protected]), or live chat (

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