Wednesday, June 08, 2011

Did Your Favorite Local Nonprofit Lose Its Tax Exemption Recently?

Over one-quarter million not-for-profits recently have lost tax-exempt status according to a recent IRS report. Most of the affected organizations were small and many may be defunct. The problem is that these organizations failed to file an information return with the IRS during the past three years. The requirement was triggered by a pension bill passed in 2006. The IRS has notified many small nonprofits of their need to file and has provided a $100 filing fee option to satisfactory nonprofits which wish to come good.

I am not a fan of the provision of the 2006 law which affects nonprofits with revenues under about $200-250 thousand; many such organizations simply have to use volunteer help with finances and that help may not understand the need for filing with the IRS. I do, however, give the IRS credit for trying to meet small nonprofits halfway (and in some cases, more than halfway).


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