Form 990 – it pays to be on time

Your organization has almost a year after the end of the tax year to file the Form 990, when you consider the allowable two extensions. But if you have gross receipts of more than $1,000,000 and you don’t provide reasonable cause for filing late, you are penalized $100 per day until the return is filed. The maximum penalty is $50,000. If your gross receipts are less than $1,000,000, the penalty is $20 per day, with a maximum of $10,000 or 5% of gross receipts, whichever is less.

Reasonable cause for filing late is determined on a case-by-case basis by the IRS. If you are filing late and believe you have reasonable cause, here are the steps you must take:

  1. Attach a written request for abatement of penalties to the Form 990.
  2. Include that the truth of the statements are made under penalties of perjury.
  3. State the reason for penalty, which may be either filing a late or incomplete return (or both).
  4. Explain the reason for not complying with the deadline, such as why the organization did not request an extension, and/or how the organization was not careless in the decision to file late.
  5. Detail the steps that the organization is taking to prevent late filing in the future.

Failure to fill the Form 990 for three consecutive years results in automatic revocation of tax-exempt status. So, know your due dates and stick with them!