Someone on your team dropped the ball.
Your dog chose a new chew toy.
It doesn’t matter.
In filing the IRS Form 990 EZ, all applicants must file by one of these two deadlines, depending on your organization.
- May 15th if your organization is following the Calendar Tax Year.
- The 15th day of the 5th month after the last month that concludes your fiscal tax year.
(For example, if your fiscal tax year ended in April, you would file your taxes September 15th)
If you missed the IRS Form 990 EZ’s deadline, and if you’ve read any of our other articles on the subject, you know the IRS tends to be pretty serious when it comes to missed deadlines—especially when potential tax revenue is up for debate.
In short, failure to submit your IRS Form 990 EZ filing on time has some stiff punishments including fines at best, and at worst, the complete revocation of your tax-exempt status.
Although there’s an extension that can be filed that grants the filer six more additional months to submit their form, that extension form must be filed BEFORE the deadline—not after.
So, what happens when you make the mistake of missing the filing deadline?
Well, here’s what you can expect:
You’re going to be fined.
Let’s start with this assumption: you filed late, and your organization has gross receipts less than $1,000,000 for the tax year…
- You’ll be imposed a penalty of $20 per day for each day the return is late.
- The max penalty is $10,000, or 5% of the organization’s gross receipts—whatever is less.
- Special note: If your organization’s gross receipts exceed $1,000,000, that daily penalty shoots up to $100 per day, with a maximum charge of $50,000.
And these penalties get much worse if you fail to file for more than three years.
Here’s what happens if you fail to file for too long:
- You’ll lose your tax-exempt status.
- You’ll have to reapply and pay filing fees.
And the loss of your tax-exempt status will mean you’ll be back to paying taxes again.
Obviously, for a nonprofit, you’re already dealing with razor-thin budgets, so the possibility of paying taxes on your fiscal year’s gross receipts could break your organization.
However, there is a way to avoid these penalties…
Explain why your filing is late and you can have the fees waived
Some say “the truth will set you free.”
In the case of the IRS, the same can be said for taxes. Although you cannot use the IRS extension form 8868 to extend your deadline, if you mail a letter to the IRS explaining why you were unable to meet the federal deadline, you may get the fees waived.
Submit your proper IRS Form 990 EZ filing ASAP
The U.S. government will fine you $20-$100 dollars every day you fail to submit the 990 EZ or send a letter detailing why your penalty fees should be waived.
To avoid the accumulation of more debt that may (or may not) be waived by the IRS, submit your filing as soon as possible.
If you need help with this, find an IRS-approved tax filer.
Not only are these entities licensed and approved, but more importantly, they’re convenient. Rather than worrying about deadlines and dates, empower a tax representative to handle the little things, get your organization’s tax-exempt status back on track, and instead focus on the success and growth of your organization.
Lastly, and most importantly, let’s talk about how to avoid falling into this position for next year.
A few tips to avoiding missing deadlines next year
We get it.
Sometimes deadlines are forgotten. Sometimes unexpected elements pop up. Sometimes you just underestimated how much time you’d need to file.
But now that you’ve missed—or gotten close to missing—your filing deadline, it’s important to take away a clear lesson for the future so this NEVER happens again.
Here are a few to take to the bank:
Create systems for information gathering right now
If you’ve submitted your application, you’ve got a max of 364 days between now and your next filing. Don’t sit on your hands waiting until the last month of the deadline here, then scramble to get your financial records and organizational structure information together.
That’s poor planning.
Instead, create a system that is repeatable on a monthly basis—or even a weekly basis, if necessary—that collects all the relevant information you’ll need for filing next year’s IRS Form 990 EZ. This means gross receipts for the week/month, changes in personnel such as promotions or restructuring, and any other information requested by the IRS Form 990.
By keeping accurate records, that are readily accessible and up-to-date, you’ll be in a great position come tax-time.
Get in touch with an IRS-approved tax-filer
We mentioned this above, but it bears repeating. Filing the IRS Form 990 EZ can be a headache without any guidance. There are reams, and reams, of IRS documents—we know, because we read them all the time—and U.S. tax code isn’t a simple subject.
So, consider hiring a professional.
Rather than trying the do-it-yourself approach, underestimating the time it takes to prepare for an IRS Form 990 EZ filing, missing your deadline, and being hit with fines and other penalties, reach out to an approved tax-filer early, submit the information you need early, and wait for confirmation of your tax-exempt status.
It’s really that simple.
File the IRS form 8868 if you even THINK you’ll miss your deadline
A free 6-month extension?
Where was that perk for your college term paper, right?
But in all seriousness, this is a pretty lenient policy by the IRS, so take advantage of it. Know your deadlines and if you feel that you’re in jeopardy of missing them, file an extension just in case to buy yourself more time.
Missing the IRS form 990 EZ deadline can be a frustrating experience when it means being hit with daily penalties and the potential loss of your tax-exempt status. However, by reaching out ahead of time BEFORE you miss your deadline and filing the form 8868, you’ll gain all the time you need to submit your filing and avoid any problems with Uncle Sam.
If you have any questions on how to file the IRS 990 EZ
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