IRS Filing Deadline Is Fast Approaching for Small Charities

May 07, 2008

IRS Filing Deadline Is Fast Approaching for Small Charities

Next week comes the first annual deadline for the smallest nonprofit groups to comply with a new federal requirement to file annual information with the Internal Revenue Service, and a group of accountants in Connecticut want to make sure organizations are ready.

New tax law requires nonprofits groups with $25,000 or less in annual revenue to file the new Form 990-N informational tax return by the 15th day of the fifth month after the end of a fiscal year. For those operating on a calendar year, for example, the deadline would be May 15.

Previously, small groups were exempt from filing any returns with the IRS. To inform them of the new requirement, the IRS sent out 650,000 letters last year, and posted an online question-and-answer page meant to help organizations comply.

But Adam P. Cohen, a West Hartford accountant, thinks more ought to be done to get the word out about the new rule and to teach organizations how to file. So, in conjunction with the Connecticut Society of CPAs and a local group that offers pro-bono accounting services, Mr. Cohen has publicized information about the Forms 990-N, and is running free clinics this week to assist in their preparation.

Charity officials can visit the clinics on Friday afternoon at any of three libraries around the state to learn how to file the online Forms 990-N, also known as “e-postcards.”

The form requires only basic information, such as the name of a principal officer, a mailing address, and confirmation that gross receipts total less than $25,000. Still, some charity observers worry that many small organizations may be intimidated by the federal forms, and that many more may not even be aware they exist.

If an organization fails to file the Form 990-N three years in a row, the IRS will automatically revoke its tax-exempt status.

“My suspicion is that there are many micro-nonprofit groups that don’t know about the requirement,” Mr. Cohen says. “You might have the checkbook for your kid’s soccer league, but the information about your responsibilities has not reached you.”

— Debra E. Blum

Comments

I agree with Mr. Cohen and the Connecticut accountants who have expressed their doubt about the I.R.S.’ efforts to reach out to small non-profits and educate them about the 990-N.

The I.R.S. should have and needs to take an approach to educating those who need to file that is similar to the effort being made to educate the American public about the move to digital TV. To say they mailed out 650,000 postcards notify agencies of the need to file is a joke. One of the reasons the 990-N came into existence was the belief by Congress that one did know where these non-reporting organizations were, if they were still operating and how one could contact them. Therefore, the I.R.S. takes last know addresses mails to them and claims success – I doubt it.

I would be amazed if the response rate to the first filing deadline is close to 33%. Then since the I.R.S. file does not show what the agency’s fiscal year is, it will be very difficult to determine what the response rate is and how that rate is impacted by time of fiscal year or lack of knowledge of the reporting requirement.

Simply put the I.R.S. while their efforts may have been well meant, I believe have fallen well short of what they needed to do to insure compliance. The question then is do they want compliance?

John C McGee
Woodsstock, GA

— John C McGee May 8, 12:36 PM #

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IRS Filing Deadline Is Fast Approaching for Small Charities

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