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Small Charity Tax Filing Rules Simplified

IRS expands use of simpler e-Postcard (Form 990-N) for annual information filings

On Jan. 13, 2011, the Internal Revenue Service issued Revenue Procedure 2011-15, providing guidance that will allow significantly more tax-exempt organizations to file the e-Postcard tax return (Form 990-N) rather than Form 990-EZ or the standard Form 990. For tax years beginning on or after Jan. 1, 2010 most tax-exempt organizations whose gross annual receipts are typically $50,000 or less can file the e-Postcard. The IRS had previously set the threshold at $25,000 or less. However, supporting organizations and private foundations aren’t permitted to file the e-Postcard; rather, they are required to file the Form 990 or, if eligible, Form 990-EZ (Supporting Organizations) or Form 990-PF (Private Foundations). A tax-exempt organization’s annual gross receipts or total assets are used to determine which version of Form 990 it’s required to file. contains information to help a tax-exempt organization determine which form to file.

The e-Postcard return is a creation of the Pension Protection Act of 2006 (the PPA), which made important changes to the rules regarding tax-exempt organizations’ annual filing requirements. The changes to those rules took effect as of Jan. 1, 2007. First, the PPA mandated that small tax-exempt organizations, other than churches or church-related organizations, file an annual notice with the IRS if they were too small to file Form 990 or Form 990-EZ. The e-Postcard (Form 990-N) was created for small organizations (those with annual gross receipts of $25,000 or less) that hadn’t previously been required to file. Second, it required all supporting organizations, regardless of their size, to file the standard Form 990 or Form 990-EZ. Finally, the PPA specified that any tax-exempt organization that didn’t file for three consecutive years would automatically lose its tax-exempt status.

A word of caution: If an organization loses its exemption, it will have to re-apply with the IRS to regain its tax-exempt status. And any income the organization received between the revocation date and the renewed exemption date would likely be taxable.

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