When you work or volunteer at a nonprofit organization, you know the days can be hectic, and nonroutine tasks can sometimes get overlooked. If the annual requirement to file a tax return or notice with the IRS was one of those overlooked tasks, you may receive a letter revoking your organization’s federal tax-exempt status.
The revocation is automatic when your organization is required to file and fails to do so for three consecutive years. Fortunately, “automatic” does not mean permanent. In January of this year, the IRS issued streamlined procedures for reinstating your tax-exempt status.
What you need to do depends on the size of your organization and how quickly you apply for reinstatement after receiving the notice. For example, say your nonprofit has annual gross receipts of $50,000 or less and you were required (but failed) to file the annual electronic notice, Form 990-N, also called the “e-postcard.”
To request reinstatement of your tax-exempt status, you need to complete “Form 1023, Application for Recognition of Exemption,” and pay the applicable filing fee within 15 months of the revocation.
You can follow a similar procedure if your organization’s gross receipts are less than $200,000 and total assets at year-end are less than $500,000. In that case, you’ll also have to complete Form 990 for the prior years.
In both situations, if your application is approved, failure to file penalties will be waived.
The revenue procedure offers two other methods of reinstating your organization’s tax-exempt status. Please contact us if you need details.