IRS clarifies new filing requirements for small nonprofits

The Internal revenue Service has posted answers to frequently asked questions about the new reporting requirements for small tax-exempt organizations are now available on the IRS website. Click here to access the new FAQ.

The IRS admits some small tax-exempt organizations have been confused over the new reporting requirements imposed by the Pension Protection Act of 2006, which are effective for tax years ending after Dec. 31, 2006, and says the new FAQs were posted to help make the new requirements clear.

The new filing requirements affect small nonprofits organizations with gross receipts of $25,000 or less. In the past, these organizations were not required to file an IRS Form 990, or Form 990-EZ. However, the Pension Protection Act now requires them to file an electronic Form 990-N electronically by the 15th day of the fifth month after the close of the organization's tax period.

The IRS began mailing educational letters to more than 650,000 small tax-exempt organizations in July to warn them of this new requirement and that the Act requires the IRS to automatically revoke the tax-exempt status of any organization failing to meet its annual filing requirement for three consecutive years.

Small nonprofits may the requirement by filing the either new Form 990-N or the full-fledged Forms 990 or 990-EZ. If an organization fails to file one of these forms for three consecutive years it will need to apply for reinstatement of tax-exempt status. The application process includes payment of user fees and completing an application for reinstatement using IRS Form 1024.