Small nonprofits to receive 'file or die' letters

The Internal Revenue Service has begun sending letters to small nonprofits reminding them of new reporting requirements that go into effect in 2008. Previously, organizations with under $25,000 in gross receipts did not have to file an annual notice.

Now, however, nonprofits that were not required to file a Form 990 must file a Form 990-N, the "Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ." The form is due in calendar year 2008 for the 2007 tax year and can be filed electronically and free of charge.

The IRS letter alerts small nonprofits "your filing requirements may have changed. Because of legislative changes, you may be required to file an annual electronic notice for tax periods beginning after Dec. 31, 2006. ... The annual electronic notice is due by the 15th day of the fifth month after the close of your tax period. For example, if your tax period ends on Dec. 31, 2007, the annual electronic notice is due May 15, 2008."

The new Form 990-N filing includes the name and mailing address of the organization, any other names used, it's web address if it has a web site, the name and address of its principal officer and a statement confirming that the organization's annual gross receipts are $25,000 or less. Click here for more information about the new reporting requirement.

Organizations that fail to file the annual report for three years in a row will lose their tax-exempt status and either have to reapply or be subject to federal taxes. The IRS letter says: "If your tax-exempt status is revoked for failing to file the annual electronic notice or information return, such as Form 990, Form 990-EZ, or Form 990-PF, for three consecutive years, you must apply (or reapply) for exemption using Form 1023, Application for Recognition of Exemption, or Form 1024, Application for Exemption Under Section 501(a), and pay the appropriate user fee.

"Reinstatement of tax-exempt status may be retroactive if you can show that you had reasonable cause for not filing the annual electronic notices or information returns," the letter says.