Associations, faith-based organizations, social services organizations, private foundations, private schools and other nonprofit entities need a tax partner with extensive experience with tax-exempt organizations. Our dedicated team of nonprofit tax experts understand that your Form 990 is more than just a tax return; it is an overview of your financials, and it outlines your mission and the achievements you’ve made throughout the year.
Non-Profits
Lost & Found: How To Regain Your Nonprofit’s Tax-Exempt Status
What To Do When Your Organization Loses Tax-Exempt Status
The Internal Revenue Service (IRS) may revoke a nonprofit’s tax-exempt status, most commonly due to failure to file required annual returns. This loss can present significant challenges for organizations, including the loss of tax-deductible contributions, ineligibility for grants, and potential retroactive tax liabilities. Prompt action is essential to restore exempt status.
This article outlines the process and considerations involved in regaining tax-exempt status for your nonprofit.
Filing for Exemption Recognition
Nonprofit organizations that fail to file an annual Form 990, 990-EZ, or 990-N (e-postcard) for three consecutive years will have their exemption automatically revoked. Fortunately, reinstatement is possible.
To begin, verify that your organization is registered on pay.gov. Submission of one of the following electronic forms may be required:
- Form 1023, “Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code”
- Form 1024, “Application for Recognition of Exemption Under Section 501(a) or Section 521 of the Internal Revenue Code”
Certain smaller organizations may qualify for retroactive reinstatement from the date of revocation. Eligibility requires that the nonprofit was permitted to file either Form 990-EZ or 990-N for the preceding three years and has not previously had its exempt status automatically revoked. The appropriate application must be submitted within 15 months of either the date on the IRS revocation notice or the date the organization’s name appeared on the IRS website.
Accounting and Audit Services for Nonprofits
From tax regulations to unique reporting requirements, not-for-profit associations and nonprofit start-ups require a certain expertise to address their distinctive financial needs. Mildrid Esua CPAs’ team of experienced accountants helps nonprofit associations, charities, service organizations not-for-profit startups and foundations manage their nonprofit assets while also sustaining their important missions.
File For Exemption Recognition
If a nonprofit organization is required to file an annual Form 990, 990-EZ, or 990-N (e-postcard) and fails to do so for three consecutive years, its exempt status will be automatically revoked. The good news, however, is that it’s possible to regain the status.
Request For Tax Exemption
When filing for recognition of exemption, attach a detailed statement explaining why you failed to file required returns for three consecutive years. Include facts about each failure, ongoing issues, and discovery, as well as steps taken to prevent or mitigate them
Achieving Nonprofit Re-Qualification
If you file correctly and submit the necessary paperwork, your organization will likely regain its tax-exempt status. The IRS will then issue a new determination letter and update its records to confirm your eligibility for tax-deductible contributions.
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