Special Issues for Tax-Exempt Organizations

Non-profit organizations, specifically those operating with IRS Section 501(c)(3) status as a tax-exempt organization, have unique IRS compliance issues that they have to monitor during the life of the entity.  Even though the organization is “tax-exempt,” they are still required to file an annual tax return with the IRS.  The type of return that needs to be filed varies depending on the gross receipts of the organization.  If the organization fails to file a required tax return for three consecutive tax years, the IRS automatically revokes their tax-exempt status.  The organization will then have to reapply for tax-exempt status, a process that can be increasingly more difficult if the application is not submitted within a certain time frame.

In addition, if the organization has employees, the organization is required to file Form 941, reporting and paying employment taxes to the IRS each quarter.  A delay in filing and paying these taxes will result in penalties and interest being assessed against the organization, and potentially penalties being assessed against the officers or directors of the organization personally. 

With any of these issues, it is important to hire an experienced tax attorney to help you navigate these requirements and deadlines.  If your tax-exempt organization is concerned about their current tax compliance, or has already received a letter from the IRS, please contact Patricia Carbone today to set up a consult.