IRS Issues Tax-Exempt Status Loss Warning

January 25, 2010 Taxation in USA

washdc040208-02The US Internal Revenue Service (IRS) has issued a warning to non-profit organizations that they could be in danger of losing their tax-exempt status in 2010.

On January 21st the IRS issued a news release reminding all US tax-exempt organizations that Pension Protection Act of 2006, which was enacted in 2007, requires them to file their annual information forms annually, or face losing their status after three consecutive non-filings. This year will be the first in which the law will be enforced. The information of all non-compliant entities will subsequently be published and made available to both state tax and charity officials. Affected non-profit organizations will be given opportunity to reapply for tax-exempt status but will face tax liabilities in the time until their status reinstatement. Further, throughout the time that the status is under assessment, all contributions to the organization will not be deductible to the donors. All tax-exempt information returns are due on the 15th day of the 5th month after the end of an organization’s tax year.

Current filing requirements categorize organizations through their financial activity levels. Those with Gross Receipts of less than USD25 000 are only required to fulfill minimal filling obligations and are eligible for full electronic filling. Privately foundations and those with high Gross Receipts or Assets are faced with higher requirements.

The most recent edition of Publication 78, a cumulative list of US tax-exempt organizations, currently includes of 750 000 entities.

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