Corporations Must Update Employer Identification Number (EIN) Responsible Party Information

Calling it a key security issue, the Internal Revenue Service on July 30, 2021, urged those entities with Employer Identification Numbers (EINs) to update their applications if there has been a change in the responsible party or contact information.

IRS regulations require EIN holders to update responsible party information within 60 days of any change by filing Form 8822-B, Change of Address or Responsible Party – Business. It is critical that the IRS have accurate information in cases of identity theft or other fraud issues related to EINs or business accounts.

The data around the “responsible parties” for business-type entities is often outdated or incorrect, meaning that the IRS does not have accurate records of who to contact for identity theft issues. This means a time-consuming process to identify the point of contact so the IRS can inquire about a suspicious filing.

As a result, the IRS intends to step up its awareness efforts aimed at businesses, partnerships, trusts and estates, charities and other entities that are EIN holders. Starting in August, the IRS will begin sending letters to approximately 100,000 EIN holders where it appears the responsible party is outdated.

All EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (Social Security number, Individual Taxpayer Identification Number or EIN) of the true principal officer, general partner, grantor, owner or trustor.

The IRS defines the responsible party as the individual or entity who “controls, manages, or directs the applicant entity and the disposition of its funds and assets.”

Unless the applicant is a government entity, the responsible party must be an individual, not an entity. If there is more than one responsible party, the entity may list whichever party the entity wants the IRS to recognize as the responsible party.

EINs are to be used strictly for tax administration purposes. Entities with EINs that are no longer in use should close their IRS tax accounts and follow steps outlined at Canceling an EIN – Closing Your Account.

2021-09-11T09:34:20-07:00September 11th, 2021|IRS News|0 Comments

Automatic Revocation – How to Have Your Tax-Exempt Status Reinstated

Organizations whose tax-exempt status was automatically revoked because they did not file required Form 990 series returns or notices for three consecutive years can apply for reinstatement of their tax-exempt status.

Revenue Procedure 2014-11 explains the four procedures an organization may use to apply for reinstatement.

Streamlined retroactive reinstatement

Organizations that were eligible to file Form 990-EZ or 990-N (ePostcard) for the three years that caused their revocation may have their tax-exempt status retroactively reinstated to the date of revocation if they:

  • Have not previously had their tax-exempt status automatically revoked.
  • Complete and submit Form 1023 Form 1023-EZForm 1024 or Form 1024-A with the appropriate user fee not later than 15 months after the later of the date of the organization’s Revocation Letter (CP-120A) or the date the organization appeared on the Revocation List on the IRS website.

For organizations electronically submitting Form 1023, see Schedule E, Section 4; 1023-EZ see Part V; or 1024-A, see Part VI. For organizations submitting Form 1024, they should write on the top of the form “Revenue Procedure 2014-11, Streamlined Retroactive Reinstatement,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
TE/GE Stop 31A Team 105
Covington, KY 41012-0192

In addition, the IRS will not impose the Section 6652(c) penalty for failure to file annual returns for the three consecutive taxable years that caused the organization to be revoked if the organization is retroactively reinstated under this procedure and files properly completed and executed paper Forms 990-EZ for all such taxable years. (For any year for which the organization was eligible to file a Form 990-N, the organization is not required to file a prior year Form 990-N or Form 990-EZ to avoid penalties.) The organization should write “Retroactive Reinstatement” on the Forms 990-EZ and mail them to:

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0027

Retroactive reinstatement process (within 15 months)

Organizations that cannot use the Streamlined Retroactive Reinstatement Process (such as those that were required to file Form 990 or Form 990-PF for any of the three years that caused revocation or those that were previously auto-revoked) may have their tax-exempt status retroactively reinstated to the date of revocation if they:

  • Complete and submit Form 1023,  Form 1024 or Form 1024-A with the appropriate user fee not later than 15 months after the later of the date on the organization’s revocation letter (CP-120A) or the date the organization appeared on the Revocation List on the IRS website.
  • Include with the application a statement establishing that the organization had reasonable cause for its failure to file a required annual return for at least one of the three consecutive years in which it failed to file.
  • Include with the application a statement confirming that it has filed required returns for those three years and for any other taxable years after such period and before the post-mark date of the application for which required returns were due and not filed.
  • File properly completed and executed paper annual returns for the three consecutive years that caused the revocation and any following years. The organization should write “Retroactive Reinstatement” on these returns and mail them to:

Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0027

These organizations should check the box on Schedule E for Section 5 when submitting Form 1023 electronically. For organizations submitting 1024-A electronically, check the box for Section 5 in Part VI. For organizations submitting Form 1024, they  should write on the top of the Form 1024, “Revenue Procedure 2014-11, Retroactive Reinstatement,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
TE/GE Stop 31A Team 105
Covington, KY 41012-0192

In addition, the IRS will not impose the Section 6652(c) penalty for failure to file annual returns for the three consecutive taxable years that caused the organization to be revoked if the organization is retroactively reinstated under this procedure.

Retroactive reinstatement (after 15 months)

Organizations that apply for reinstatement more than 15 months after the later of the date on the organization’s revocation letter (CP-120A) or the date the organization appeared on the Revocation List on the IRS website may have their tax-exempt status retroactively reinstated to the date of revocation if they:

  • Satisfy all of the requirements described under the “Retroactive reinstatement (within 15 months)” procedure EXCEPT that the reasonable cause statement the organization includes with its application must establish reasonable cause for its failure to file a required annual return for all three consecutive years in which it failed to file.

These organizations should check the box on Schedule E for Section 6 when submitting Form 1023 electronically. For organizations submitting 1024-A electronically, check the box for Section 6 in Part VI. For organizations submitting Form 1024, they should write on the top of the Form 1024, “Revenue Procedure 2014-11, Retroactive Reinstatement,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
TE/GE Stop 31A Team 105
Covington, KY 41012-0192

In addition, the IRS will not impose the Section 6652(c) penalty for failure to file annual returns for the three consecutive taxable years that caused the organization to be revoked if the organization is retroactively reinstated under this procedure.

Post-mark date reinstatement

Organizations may apply for reinstatement effective from the post-mark date of their application if they:

These organizations should check the box ) for Section 7 on Schedule E for Form 1023  or Part V for Form 1023-EZ. For organizations submitting 1024-A electronically, check the box for Section 7 in Part VI. For organizations submitting Form 1024, they should write on the top of the Form 1024, “Revenue Procedure 2014-11, Reinstatement Post-Mark Date,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
TE/GE Stop 31A Team 105
Covington, KY 41012-0192

What’s a reasonable cause statement?

A reasonable cause statement establishes that an organization exercised ordinary business care and prudence in determining and attempting to comply with its annual reporting requirement. The statement should have a detailed description of all the facts and circumstances about why the organization failed to file, how it discovered the failure, and the steps it has taken or will take to avoid or mitigate future failures. For a detailed explanation see Section 8 of Revenue Procedure 2014-11.

Avoid being automatically revoked again – file annual returns

An organization can be automatically revoked again if it fails to file required returns for three consecutive years beginning with the year in which the IRS approves the application for reinstatement. Organizations seeking reinstatement of tax-exempt status after a subsequent revocation are not eligible to use the Streamlined Retroactive Reinstatement Process.

Additional information

Revenue Procedure 2014-11 modified and superseded Notice 2011-44, Application for Reinstatement and Retroactive Reinstatement for Reasonable Cause under Internal Revenue Code Section 6033(j).

2021-09-06T15:01:48-07:00July 6th, 2021|Applications for Exemption, IRS News|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

501(c)(3) Charities’ Annual IRS Filings and Forms

In general, exempt organizations are required to file annual returns, although there are exceptions. If an organization does not file a required return or files late, the IRS may assess penalties. In addition, if an organization does not file as required for three consecutive years, it automatically loses its tax-exempt status.

The IRS sends back Form 990 series returns filed on paper – and rejects electronically filed returns – when they are materially incomplete or the wrong return. If we send back your organization’s return, follow the instructions in the accompanying letter and on this page.

The most common errors causing the return of a Form 990 series returns are missing or incomplete schedules .

Review these pages for Form 990, 990-EZ, and 990-PF filing tips:

Additional information

2020-03-03T07:19:59-07:00January 14th, 2020|IRS News|0 Comments

Tax Exempt Organizations Required 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.

Interactive Training

Learn more about the benefits, limitations and expectations of tax-exempt organizations by attending 10 courses at the online Small to Mid-Size Tax Exempt Organization Workshop.

Additional information

2020-03-02T22:04:30-07:00December 21st, 2019|IRS News|0 Comments
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