Late-Filing IRS Penalty Relief for Nonprofits

It happens to lots of nonprofit organizations for various reasons. But failing to file Form 990 on time doesn’t have to end with writing a large check to the IRS.

The filing requirements are clear; A nonprofit organization (with limited exceptions) MUST annually file either Form 990-N, Form 990-EZ, Form 990, or Form 990-PF. Which form it files depends largely on the level of gross receipts and total assets owned.

However, the IRS understands that nonprofits often rely on well-meaning but uninformed volunteers to manage the organization, keep the books and financial records, and perform tax-exempt functions. So it has historically offered a considerable amount of leniency and forbearance to nonprofit organizations that it does not offer to for-profits.

Officers, directors, managers, and professional advisers to non-profit organizations should not be shy about asking the IRS to abate penalties assessed for late filing of the Form 990 series when the organization generally has a good filing history, or if it is a newly formed organization, or has otherwise encountered circumstances beyond its control which resulted in the late filing of a return, even when multiple years may be involved.

While it does appear that the IRS may be taking a harder line on non-compliant nonprofits now than it has in the past, it is still likely that for two years or less of non-compliance, a nonprofit stands a very good chance of receiving abatement of late filing penalties if it can convince the IRS that it had reasonable cause for being late.

The IRS code and regulations as well as the IRS website and other published guidance has some helpful guidance on what it considers reasonable cause and what has to be shown to demonstrate that reasonable cause exists.

Writing a reasonable cause penalty abatement request letter to the IRS is not difficult. But in order to be successful you need to structure your argument properly, include all relevant facts and circumstances, and anticipate all the questions that the IRS might ask concerning why the organization was late.

Unless you are familiar with the code’s reasonable cause provisions, you should probably get some professional help.

Learn how to write a reasonable cause penalty abatement request for tax-exempt organizations that have been assessed late filing penalties for Form 990.


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