Many not for profits may have all their ducks in a row as far as sponsorship , advertising, purpose so on and so forth, but tend to forget one thing which ends up costing them unnecessary penalties and in some cases licenses and special tax classifications that are a headache to get in the first place. Filing annual non profit tax returns with the IRS is required to maintain an organization’s tax exempt status.
Certain non profits (organizations with gross receipts under 50,000) were not required to file with the IRS until 2007, when the law was changed and a filing requirement was imposed on all tax-exempt organizations. Since the law was changed, and all tax-exempt organizations became responsible for filing information returns annually, 275,000 non-profit organizations have lost their tax-exempt status due to not filing their non profit tax forms with IRS for three consecutive years. The application for a non-profit to obtain a tax exempt certificate is time consuming and if being handled by a third party can be fairly costly.
Luckily, there are options for non-profits who have had their status revoked as a result of failure to file a non profit tax return for three years in a row. The IRS provides transitional relief for all organizations that lost their tax-exempt certificate because they failed to file the required non profit tax forms. Small organizations (i.e., with annual gross receipts of $50,000 or less for 2010) who file for reinstatement will pay a reduced user fee to reinstate their tax-exempt status. Instead of the typical $400 to $850 fee, eligible non-profits only have to pay $100 if their application to reinstate their tax-exempt status is postmarked no later than Dec. 31, 2012. Further information regarding applying for the reduced fee can be found here.