Saturday, March 1, 2008

Guidance on the 990 Postcard

On February 25, 2008, the IRS issued guidance on the Form 990-N, the "e-Postcard," filing requirement of small tax-exempt organizations (i.e., those with gross receipts annually of $25,000 or less). The Pension Protection Act of 2006 requires such organizations to file the e-Postcard starting in 2008 for tax years beginning with 2007. Small tax-exempt organizations are now required to make e-Postcard filings by the 15th day of the fifth month following the close of their tax year. The filing is made electronically only, and the public can view the e-filings on the IRS website. Prior to the new e-Postcard requirement, small tax-exempts were not required to file either Form 990 or 990-EZ. Small tax-exempts still do not have to file these forms. Also, while there is no immediate penalty for failing to file the e-Postcard, those nonprofits that fail to file the e-Postcard for three consecutive years will lose their tax-exempt status. The IRS will send a notice reminding organizations of the obligation to file but the ultimate responsibility rest with the tax-exempt organization. As a result, the IRS is urging everyone -- individuals, accountants, lawyers and volunteers -- to spread the word to local charities. Tax-exempts included on a group return and churches are not required to make this filing. On the other hand, larger tax-exempts with receipts of more than $25,000, private foundations and 509(a)(3) organizations are required to continue filing Form 990 or 990-EZ but are not required to also file the e-Postcard.

As a practical matter, tax-exempt organizations whose volunteers, staffs and directors change more frequently than other types of organizations must be vigilant. That would include updating the IRS on address changes as a matter of practice or protocol. The law requiring the e-Postcard balances the purposes of the act (i.e., giving potential donors more information and informing the public) with the fragile administrative realities of many small tax-exempt organizations. This balance was struck under the law in the following way -- the law does not impose late filing fees for filing late, and an organization's tax-exempt status will not be revoked for failing to file until after three consecutive years of failing to file the e-Postcard.

Additional information is available on the IRS Website

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