Did your favorite non-profit just lose its tax exempt status?



Please giveNon-profits are formed all the time to advance a purpose to better the world or support a cause.  While the philanthropic goals are wonderful. the record-keeping behind them is often spotty or non-existent. The result of bad record keeping?  The IRS has just revoked the tax exempt status of 275,000 charities nationwide, 7800 of which are here in New Jersey. (Look at the list here to see if your favorite non-profit no longer is one)

By way of background, it used to be that small charities didn't have to file a federal income tax return.  That was changed starting in 2007, when all charities became required to file a Form 990-N.  The deadline for all those filings was October 15, 2010.  For any non-profit that didn't file, their tax exempt status was just pulled by the IRS.

What does this mean to the charity?  If they aren't tax exempt, then they need to start paying state sales tax on purchases, and file/pay income tax on earnings.  The IRS does have a reinstatement procedure in place for small charities with annual gross receipts of $50,000 or less in 2010. Per the IRS website “The relief allows eligible small organizations to regain their tax-exempt status retroactive to the date of revocation and pay a reduced application fee of $100 rather than the typical $400 or $850 fee. Full details are available in Notice 2011-43, Notice 2011-44 and Revenue Procedure 2011-36, issued today”

What does this mean to you, a supporter of the charity? Well, any contributions that you make are no longer deductible on your income taxes. If you report the deduction, and then the IRS says that your non-profit isn’t a charity, you could owe additional income taxes, with interest and penalties.




Non-Profits - Pay Attention - You could lose your tax exempt status on October 15

Calling all non-profits - Act NOW or lose your tax exempt status.  

The bad news - any non-profit that has not filed its income tax return Form 990-N by October 15, 2010 will lose its tax exempt status and need to reapply.

The good news - you still have time to fix the problem.  You can file the Form 990-N electronically for tax years 2007, 2008 and 2009 on or before October 15, 2010 and keep your tax exempt status.  You must file for all 3 years if you have been in existence that long and this offer expires on the 15th.

Our colleagues at Sax Macy Fromm & Co., CPA's have sent around a newsletter describing the issue for non-profits.  

The scariest part - over 9000 New Jersey non-profits are at risk.  Click here to see if you are on the list.