IRS announces ‘file or die’ requirements for small nonprofits

Beginning in 2008, smaller nonprofits will be required to file Form 990-N and nonprofits that fail to file a Form 990, 990-EZ, 990-PF or 990-N for three consecutive years will lose their tax exemptions, the IRS has announced.

Starting next year, an organization that is not required to file an IRS Form 990 or 990-EZ because its income is $25,000 or less will have to file Form 990-N, the "Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ."

Not required to file Form 990-N are: churches, their integrated auxiliaries and conventions or associations of churches; nonprofits included in a group return; private foundations required to file Form 990-PF; and section 509(a)(3) supporting organizations that are required to file Form 990 or 990-EZ.

The Forms 990-N for tax periods beginning after Dec. 31, 2006, will be due on the 15th day of the 5th month after a nonprofit's fiscal year ends. No extensions will be granted. There is no financial penalty for filing late or failure to file, but nonprofits that do not file for three consecutive years will lose their tax exemptions.

The Form 990-N requires nonprofits to provide the following information:

• Organization name
• Any other names the organization uses
• Mailing address
• Web site address (if applicable)
• Employer Identification Number (EIN)
• Name and address of a principal officer for the organization
• Annual tax period
• A statement that the organization's gross receipts are normally $25,000 or less
• Indication that the organization is going out of business (if applicable)

Nonprofits can opt to file Form 990 or 990-EZ instead of Form 990-N, but they must complete the full return. Partially completing the form doesn’t meet the filing requirement. Form 990-N is filed online – there is no paper version. Form 990-N filers will not need additional software and organizations with no computer or Internet access can complete the e-Postcard at their local libraries. An educational letter from the IRS will go out beginning in July with more information.

The Pension Protection Act of 2006 requires revoking the tax exemptions of nonprofits that fail to file for three years in a row beginning Jan. 1, 2007. In May 2010, therefoe, nonprofits that have failed to file will begin losing their tax-exempt status. To regain tax-exempt status they will have to use Form 1023, "Application for Recognition of Exemption," or Form 1024, "Application for Exemption under Section 501(a)."