IRS Fails to Properly Process Documents Sent by Nonprofit

In this video I discuss a situation where we responded to an IRS demand for a completed Schedule A from a small nonprofit that filed a return without properly completing the Schedule A. The IRS made a written demand for the Schedule A and assessed a late-filing penalty because the return was deemed incomplete.

According to the law, filing an incomplete or incorrect Form 990 is the same as not filing a return.

I determined that we needed to prepare a Schedule A, prepare an amended Form 990 (because the original was prepared using incorrect numbers), and we needed to request penalty abatement by making a reasonable cause argument.

I submitted all the documents to the IRS with detailed explanations.

The result:
The IRS saw the amended return and determined that it was a “duplicate” return despite the fact that the “amended” box was checked and I had written “Amended” in red ink at the top of the return. They ignored both the schedule A (which they had requested) and the abatement request letter.

The agent on the phone was very nice, but said none of the documents were processed, though there was a note in the file that a “duplicate” return had been received (which was not true).

The agent suggested that I resend all the documents, but send the amended return in a separate envelope. I could send it to the same address at the same time, just in a different envelope.

Does that make sense? They are telling me that they are not capable of handling an amended return when it is enclosed with an abatement request along with the Schedule A they requested?

The notice received from the IRS said to send only the information requested (Schedule A) and to not send the entire return “unless the requested information changes the original return.”

Well, the requested information did change the original return, so we sent along a complete amended return in addition to the Schedule A that they requested.

When dealing with the IRS you have to be patient and methodical. There are some very good people working the front lines at the IRS. Unfortunately they are working with systems so complicated that a rocket scientist would be flummoxed. Have you ever tried to read the Internal Revenue Manual?

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