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Nonprofit Board Members, Make Sure Your Organization Files A Tax Return

Many of us volunteer as board members for nonprofit organizations. Small organizations may have little financial oversight so as a reminder most nonprofits (other than churches) must file a nonprofit tax return (Form 990 series) by May 15. 

Small organizations with gross receipts normally under $50,000 can file Form 990-N (an electronic postcard). If a nonprofit has fluctuating income from year to year, it should file the e-postcard if average revenues were $50,000 or less for the prior three consecutive years. 

Late filing and failure to file has steep consequences.

 If an organization whose gross receipts are less than $1,000,000 for its tax year files its Form 990 after the due date, the Internal Revenue Service will impose a penalty of $20 per day for each day the return is late.

 The maximum penalty is $10,000, or 5% of the organization's gross receipts, whichever is less. The penalty increases to $100 per day, up to a maximum of $50,000, for an organization whose gross receipts exceed $1,000,000.

Those that fail to do so for three consecutive years face the automatic revocation of their exempt status as of the due date of the third required filing.

Many small organizations such as PTAs and youth athletic leagues sometimes receive shocking letters from the IRS that they lost their tax-exempt status for failure to file past tax returns. So if you serve on a board make sure your organization is in compliance with this rule.

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Richard Pon CPA, CFP