Form 990 Late Filing Penalties for Nonprofits and Tax-Exempt Organizations- Updated April 21, 2023 - 12.00 PM Admin, ExpressTaxExempt
Nonprofits and tax-exempt organizations that fail to file its Form 990 by the filing deadline are subject to penalties unless they provide a reasonable cause for the filing delay accepted by the IRS.
1. What are the Reasons for the Penalty?
The IRS penalizes organizations for the following reasons:
- Late filing or not applying for an extension
- Incorrect filing
- Incomplete required parts or lines on the form
- Failure to attach required schedules
- Missing signature
- Not filing on proper media (For instance, not filing electronically when it is compulsory)
On the 990 Late Filing, if the organization can show that the delay is due to reasonable cause, the IRS may waive the penalties.
2. Form 990 Late filing penalties
Nonprofits and Tax-Exempt Organizations must pay penalties for the late filing or incorrect filing of IRS Form 990.
The penalty applies on each day after the due date and starts accruing the day after the tax-filing due date
Penalties for Organization with gross receipts less than $1,067,000
Under section 6652(c)(1)(A), the IRS will impose a penalty of $20/day, not to exceed the lesser of $10,500 or 5% of the gross receipts of the organization for the year.
Penalties For Organization with gross receipts more than $1,067,000
Under section 6652(c)(1)(A), the IRS will impose a penalty of $105/day (with a maximum penalty for anyone return of $53,000).
Against responsible person(s):
If Nonprofits fail to file a complete return or don't furnish correct information, the IRS will provide the organization a letter that includes a fixed time to fulfill these requirements.
After that period ends, the person failing to comply is charged a penalty of $10 a day. The maximum penalty on all persons for failures for any one return shall not exceed $5,000.
3. What happens if an Organization fails to file for three consecutive years
When an organization fails to file Form 990 for 3 consecutive tax years, the IRS will automatically revoke their tax-exempt status. If this happens, the organization must pay income taxes until they have the exempt status reinstated.
To reinstate the revoked tax-exempt status, the organization must apply
Form 1023 / 1024.
4. IRS Penalty Relief
Under certain circumstances such as national disaster, fire, inability to take record, death, or severe illness, the IRS provides relief from penalties for late or incorrect filings.
Also, penalties may not be applicable if the issue reported in the notice sent to the organization by the IRS is solved within the stipulated time.
Penalties eligible for relief includes:
- Failure to file a tax return
- Failure to pay on time
- Failure to deposit certain taxes as required
- Other penalties as applicable