Jump to content
ATX Community

non profit without tax exempt status


Recommended Posts

If he's incorporated - yes.  And they won't like that answer.  Technically, if they have not filed for exempt status with IRS, they are not exempt and must file tax-paying return.  I had one of these a few year ago, but income was very low and I convinced them to get the exemption status going so we could at least call it "applied for". 

 

  • Like 3
Link to comment
Share on other sites

  • 3 weeks later...

Sorry for the late response--just saw this. Just to establish my credentials in this area: non-profits are the bulk of my biz.

Depending on a) when the entity was organized and b ) if it plans to apply for exempt status), it might not have to file an 1120.

To request IRS recognition of tax-exempt status a non-profit has to file Form 1023 (or Form 1024, depending on what type of exemption it is requesting). The filing deadline is the last day of the 27th month after it is legally formed (i.e., after its charter date). The filing fee is either $400 or $850, depending on the entity's expected level of income. Some entities qualify to file the super-simple Form 1023-EZ; its filing fee is a flat $400.

If its 1023/1024 is approved it will receive what is called a determination letter (it's important they keep it in a safe place as they will likely be asked for copies of it by banks and various others in the future). In such cases, the determination letter will (almost always) state that the entity's exempt status is recognized retroactive to the date it was formed. If that is the case, no 1120 is required for those prior periods.

On the other hand, if the IRS determines the entity does not qualify for exemption it will receive an adverse determination letter. In such cases, the entity must file an 1120 for prior (and future) periods.

If your client's 1023/1024 filing deadline has not passed (and assuming it plans to file prior to the deadline) the IRS allows it to operate under the presumption of exemption if it reasonably expects routine approval of its 1023/1024. However, it is required to file the iteration of Form 990 appropriate to its circumstances during the interim period. Which flavor of Form 990 the entity files is dependent on what type of exempt organization it is and the level of its income and net assets. 990s are due by the 15th day of the fifth month after the entity's fiscal year ends (May 15 for calendar year filers). Failure to file Form 990 for three consecutive years results in the automatic revocation of exempt status. The only way to get it reinstated is to reapply (and pay a new filing fee).

If the entity files Form 1023/1024 after the filing deadline it can still request recognition of its exempt status; however, if granted, such recognition will be retroactive only to the date the Form 1023/1024 is received by the IRS. In such cases, the entity must file an 1120 for prior periods.

Hope this helps.

  • Like 5
Link to comment
Share on other sites

Thanks for the in-depth review.  I would just add that as of July 1, if an organization qualifies to apply using the 1023EZ, the user fee has been reduced to $275.00.  And it seems to me that I recall reading somewhere that if the gross receipt are less than $5000 per year, they do not have to file for approval but should file the 990N.  In order to get set up to file the 990N, they would have to call and request registration for that purpose. 

  • Like 2
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Restore formatting

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...