Wednesday, August 25, 2010

Exempt Organizations: Due Dates for timely filing returns and related penalties

As readers of previous posts would know, normally I don't spend a lot of time focusing on tax exempt organizations, in this blog. But due to the number of inquiries I have recently received, I thought it would be a good time to revisit a common type of tax filing.

Tax exempt organizations are required to file their annual return by the 15th day of the fifth month after the close of their return year. Or in plain language, if your tax exempt organization has a calendar year and closes its books on December 31, 20XX. A timely return should be postmarked or filed by May 15th of the following year. There are two three month extensions that tax exempt organizations can apply for at their discretion.

Penalties for non-filing can be very steep.

Penalties for organizations with gross receipts under $1,000,000 are $20 per day with a maximum penalty of the lesser of $10,000 or 5% of gross receipts for the year. This penalty also applies if the filing information is incomplete.

Penalties for tax exempt organizations whose gross receipts are over $1,000,000 is $100 per day with a maximum of $50,000. Keep in mind that this penalty also applies for failing to file a complete return.

Tax exempt organizations that are required to file form 990-N are generally not subject to late filing penalties.

In addition to these penalties the IRS can impose penalties on responsible parties for failure to file upon request by the IRS. Failure to timely comply with an IRS request can result in penalties of $10 per day to that person. With a maximum personal penalty of $5,000.

Of course these penalties may be abated by the IRS pursuant to their discretion if the tax exempt organization shows just cause for the filing delay.

There may be other non-monetary failure to file penalties such as losing tax exempt status, see my article regarding the small tax exempt organization filing requirements.

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