Thursday, February 12, 2009

Nonprofits Must File or Lose Status

GuideStar, the leading provider of nonprofit information, reports that half a million nonprofits could find themselves stripped of tax-exempt status in May 2010.
According to IRS estimates, that's how many smaller organizations have failed to file a Form 990-N.

The Pension Protection Act of 2006 requires exempt organizations (nonprofits the IRS has designated as exempt from federal income taxes) that do not meet the income threshold for filing an annual return (IRS Form 990 or one of its variants) to provide certain information to the IRS each year. The IRS created Form 990-N for this purpose, and smaller nonprofits began filing it in 2008.

The Pension Protection Act also directs the IRS to revoke the tax-exempt status of any organization that fails to file an annual return, including the 990-N, for three consecutive years. Revocations will happen automatically beginning in May 2010.

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