For the first time this year, thousands of small nonprofits with annual revenues of under $25,000 must file forms or information postcards with the Internal Revenue Service. Those that miss filing deadlines could have their tax-exempt status revoked and could have to pay $750 to go through the application process all over again.
Related: "Not-for-profit organizations need D&O and EPLI too."
The change stems from a law passed by Congress 3 years ago intended to better track nonprofit organizations. Before then, those with revenues less than $25,000 were not required to file at all.
The law passed in 2006 requires most tax-exempt organizations, other than churches, to file a yearly return or notice. Non-compliance for three consecutive years can result in the organization automatically losing its tax-exempt status, which means an organization must file income tax returns, pay income tax and its contributors will not be able to deduct their donations.
Small chapters or affiliates of larger statewide or national organizations must rely on their parent organizations to take care of the filing requirements.
The IRS has stated that it will work with organizations that missed the May 17 filing deadline to help them avoid losing their tax-exempt status, and is urging organizations to file, even if they've passed the deadline.
