What happens if private foundations filed Form 990 late?

- Updated April 10, 2020 - 8.00 AM - Admin, ExpressTaxExempt

Private foundations are usually busy serving people and may miss out on filing their returns on time.

This may seem trivial, but the foundation may end up paying hefty penalties for not filing on time or for incorrect filing and sometimes its revokes their tax-exempt status.

So be cautious about what you report to the IRS and the filing deadlines. The following are the topics covered under the Form 990-PF penalty.

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1. Form 990-PF Late filing penalties

Private Foundations must pay penalties for the late filing of Form 990-PF or incorrect filing.

For late filings of private foundations with gross receipts less than $1,000,000, the IRS will impose a penalty of $20/day ($105 a day if it is a large organization) until the return is filed with the IRS if they fail to provide any reasonable cause for the delay.

The maximum penalty would not exceed the smaller of $10,500 ($53,000 for a large organization) or 5% of the gross receipts of the organization for the year.

For any incorrect or missing information on Form 990-PF, the IRS will mail a letter to the organization seeking an explanation for the missing information. Failing to submit the information to the IRS within the stated time frame, the organization will be charged a penalty of $10 per day, capped at $5,000.

Note: A large organization is one that has gross receipts exceeding $1,067,000 for the tax year.

2. What is Automatic Revocation?

An organization that fails to file the 990-PF information return for three consecutive tax years will automatically lose its tax-exempt status.

3. Other Penalties for Form 990-PF:

Other penalties may apply because the Form 990-PF should also satisfy the filing requirements of tax returns under Section 6011 for tax on investment income imposed by Section 4940 (or Section 4948 for Exempt Foreign Organizations).

Penalties imposed by Section 6651 for not filing a return without reasonable cause also apply.

Criminal penalties will apply to those who willingly fail to file and file fraudulent returns and statements. (see Sections 7203, 7206, and 7207).

4. Criteria For Penalty Relief

Under certain circumstances, penalties may not be imposed for late or incorrect filings.

You may qualify for relief from penalties if you made an effort to comply with the requirements of the law, but you were unable to meet your tax obligations due to circumstances beyond your control.

A penalty may not be applicable if you can solve the issue reported in the notice sent to you within the stipulated time.

Penalties Eligible for Relief

Penalties eligible for penalty relief include:

  • Failing to file a tax return
  • Failing to pay on time
  • Failing to deposit certain taxes as required
  • Other penalties as applicable

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