How Long is the IRS Taking to Approve Form 1023 Applications for Exemption?

Question:  If my nonprofit corporation files its IRS Form 1023 today, how long will it take before the IRS issues a letter approving the corporation as a tax-exempt Section 501(c) charitable organization?

Answer:  See the the IRS’ web page called “Where Is My Exemption Application?” to determine how far behind the IRS is in reviewing applications for tax-exemption.  We know of organizations that have received favorable IRS determination letters as quickly as six weeks and as long as two years after submitting applications for tax exemption.

2018-01-14T10:38:15-07:00October 4th, 2013|Applications for Exemption, FAQs|0 Comments

Reminder to Tax-exempt Organizations: 990s, Other Tax Forms Due May 17, 2021

Tax-exempt organizations that operate on a calendar-year (CY) basis that certain annual information and tax returns they file with the IRS are due on May 17, 2021. These returns are:

  • Form 990-series annual information returns (Forms 990, 990-EZ, 990-PF, 990-BL)
  • Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or Form 990-EZ
  • Form 990-T, Exempt Organization Business Income Tax Return (other than certain trusts)
  • Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code

Mandatory Electronic Filing

Organizations filing a Form 990, 990-PF or 990-N for CY2020 must file their returns electronically. Organizations filing Form 990-EZ for CY2020 received transitional relief and may file electronically or in paper.  To help exempt organizations comply with their filing requirements, the IRS provides a series of prerecorded online workshops. These workshops are designed to assist officers, board members and volunteers with the steps they need to take to maintain their tax-exempt status, including filing annual information returns.

“We want to make sure everyone in the exempt sector understands their obligations,” said Robert Malone, Exempt Organizations and Government Entities Director. “The IRS offers an interactive walk-through of the annual Form 990 filing process and other courses that board members and volunteers can take to learn about maintaining their charity’s tax-exempt status.”

Extension of Time to File

Tax-exempt organizations that need additional time to file beyond the May 17 deadline can request an automatic extension by filing Form 8868, Application for Extension of Time To File an Exempt Organization Return. An organization will be allowed a six-month extension beyond the original due date. In situations where tax is due, extending the time for filing a return does not extend the time for paying tax. The IRS encourages organizations requesting an extension to electronically file Form 8868.

Auto-revocation

Under Section 6033(j) of the Internal Revenue Code, organizations that fail to file their Form 990 series for three consecutive years automatically lose their exempt status. This is referred to as “auto-revocation.” The IRS is experiencing delays in processing paper returns in our service centers. Although organizations may file their CY2020 Form 990-EZ in paper, the IRS is encouraging them to electronically file their Form 990-EZ. To avoid auto-revocation, this is especially important for organizations that did not file their information returns for CY2018 and CY2019.

Small tax-exempt organizations may be eligible to file Form 990-N to satisfy their annual information return requirement. These organizations need only eight items of basic information to complete the submission, which must be electronically filed. The Form 990-N due date cannot be extended, but there is no monetary penalty for late submissions. Although there is no monetary penalty for filing Form 990-N late, organizations that failed to file their required Form 990-N for CY2018 and CY2019, and file after May 17, 2021, are auto-revoked

What Can an Organization Do if Auto-revoked?

The IRS publishes a list of, and mails notices to, organizations whose tax-exempt status has been automatically revoked. The law prohibits the IRS from undoing a proper automatic revocation, but the IRS has procedures in place to assist organizations that believe they have been erroneously listed as auto-revoked. This includes situations where an organization has documentation that it met its filing requirement for one or more years during the three-consecutive-year period. For example, if an organization receives a notice of automatic revocation or is listed as auto-revoked effective May 17, 2021, but has documentation it filed a paper Form 990 EZ or Form 8868 for CY2020 by that date, it can fax us the relevant information (an IRS receipt for a filed return, for example) at (855) 247 6123 to resolve the issue.

2021-05-07T07:08:34-07:00May 7th, 2021|IRS News|0 Comments

Are Contributions to an Organization Deductible while the Organization’s Application for Exemption is Pending?

Contributors to the organization do not have advance assurance of deductibility while the organization’s application is pending. If the organization ultimately qualifies for exemption for the period in which the contribution is made, the contribution will be tax deductible by the donor. Alternatively, if the organization ultimately does not qualify for exemption, then the contribution will not be tax deductible.

To be exempt under section 501(c)(3), most organizations must file Form 1023 or Form 1023-EZ by the end of the 27th month after they were created. If an organization does so, and the application is approved, charitable contributions to it will be deductible back to the date of formation.

The effective date of tax-exempt status (and the deductibility of contributions) depends on whether the organization has:

  • Timely filed Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, but has not yet received a letter recognizing its exempt status (explained above),
  • Filed Form 1023 later than the prescribed time, or
2020-03-03T19:36:44-07:00March 4th, 2020|IRS News|0 Comments

IRS Eliminates Paper Filing of IRS Form 1023, Application for Recognition of Tax-Exemption

As of January 31, 2020, the IRS requires that Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, be completed and submitted online through a U.S. government website called Pay.gov. There is a 90-day grace period during which the IRS will continue to accept paper versions of Form 1023.  The IRS also increased the length of Form 1023 from 36 pages to 40 pages.

To submit Form 1023, you must:

  1. Register for an account on Pay.gov.
  2. Enter “1023” in the search box and select Form 1023.
  3. Complete the form.

We prepare Form 1023. See Hire Us to Get an IRS Tax Exemption for a Charitable Organization.

2020-03-02T07:47:01-07:00March 2nd, 2020|Applications for Exemption, IRS Forms, IRS News|0 Comments

501(c)(3) Charities & Unrelated Business Income Tax

Even though an organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. For most organizations, unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption. An exempt organization that has $1,000 or more of gross income from an unrelated business must file Form 990-T. An organization must pay estimated tax if it expects its tax for the year to be $500 or more.

The obligation to file Form 990-T is in addition to the obligation to file the annual information return, Form 990, 990-EZ or 990-PF. Each organization must file a separate Form 990-T, except title holding corporations and organizations receiving their earnings that file a consolidated return under Internal Revenue Code section 1501.

Additional information:

2020-03-03T07:14:06-07:00February 9th, 2020|IRS News|0 Comments

Tax Exempt Organizations Required IRS Filings

Although they are exempt from income taxation, exempt organizations are generally required to file annual returns of their income and expenses with the Internal Revenue Service. Small tax-exempt organizations with gross receipts under a certain threshold may be required to file an annual electronic notice. Some organizations, such as churches and certain church-affiliated organizations, are not required to file annual returns or notices.

If an organization has unrelated business income, it must file an unrelated business income tax return. In addition to filing an annual exempt organization return, exempt organizations may be required to file other returns of and pay employment taxes. Some organizations may be required to file certain returns electronically.

In addition to required filings, a charity may have other ongoing compliance obligations.

Use the tables linked below to find the due date of returns that a tax-exempt organization must file. To use the tables, you must know when your organization’s tax year ends.

2020-03-02T07:59:09-07:00February 2nd, 2020|IRS Forms, IRS News|0 Comments
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