Nonprofit Tax Help

David McRee, CPA

What To Expect if You File Form 990 After the Deadline

So you've discovered that either (1) You've missed a filing deadline, or (2) You've NEVER filed a Form 990 for your organization, but you were required to.

First, DON'T PANIC! You aren't going to jail. You will most likely be assessed penalties, which the IRS will forgive if you have what they consider "reasonable cause" for filing late.


Third, expect to get letters from the IRS saying you owe huge penalties.

Fourth, write a letter explaining why you had "reasonable cause" for filing late and why you believe the penalties should be abated.

Fifth, receive a response from the IRS saying that you owe nothing. Then have a celebration!

The most important thing is that you prepare and file the returns as soon as possible after discovering that you have missed the deadline.  You can attach an explanation to the return explaining why it was late if you like, but in my experience, the IRS will still send a penalty notice and you will still have to write an abatement request letter.

The following situations often occur in nonprofit organizations:

  • A new organization does not realize it has to file a Form 990.
  • An organization files Form 990 every year, then there is a change in leadership, and the new managers/directors do not know about the filing requirement and they fail to file a Form 990.
  • A paid preparer misses the deadline for filing, for whatever reason, and the nonprofit is relying entirely on the preparer and is not paying attention to the filing deadline.

In any of the above situations, the nonprofit organization may receive a letter of inquiry from the IRS wanting to know why a Form 990 has not been filed. It is very important that the organization respond immediately to the letter in the manner requested, and that the Form 990 be filed as soon as possible.

Once it has been discovered that a Form 990 should have been filed, but wasn't, it is generally considered to have been filed within a reasonable period of time if it is filed within 30 days of discovery. This is not carved in stone (I've seen situations where the filing was delayed for over 6 months and the penalty was still abated), but it is a general guideline and puts an organization in a strong position to request and receive abatement of penalties.

Multiple Years Late Returns

If your organization has failed to file Form 990 for multiple years, they should all be prepared and filed as soon as possible. My recommendation is that you should only go back 4 years to file Form 990. I got it from an "unofficial" source at the IRS that they really only want the last 4 years' returns. I don't know exactly why that is, unless it has to do with the 4 year public support test.

Important Note--NEW LAW: For tax years ending on or after December 31, 2007, if an organization fails to file either Form 990-N, Form 990, or Form 990 EZ for three consecutive years, its tax-exempt status will automatically be revoked as of the due date of the 3rd return that was not filed. There is no "reasonable cause" provision in this new law. To get your exempt status back you will have to re-apply with Form 1023 or 1024. This new law has huge implications and undoubtedly will cause much grief to some organizations. Don't be one of them, please.

Expect to get a letter assessing penalties for all of the years for which Form 990 was late. Write a separate abatement request letter for each penalty notice, even if each letter is exactly the same, with the exception of the reference to the year to which it applies. Why write separate letters? Trust me, it just works better that way. The IRS has a system, and rules. Lots of rules. Don't make them think. They don't have a form for that.

How to Write a Letter Requesting Penalty Abatement

The IRS has guidelines as to what it accepts as "reasonable cause" for filing late. To understand whether you fall within the limits of "reasonable cause" (or can be shoe-horned into them), it is important to read and understand the Internal Revenue Code sections and Treasury Regulations that pertain to "reasonable cause," as well as the guidance in IRS publications and the Internal Revenue Manual, and of course, there are some court cases that come into play as well.

If that sounds like a daunting task, you're right, it is. But in my Form 990 Penalty Relief Manual e-book, I've done all that for you. I've organized, and distilled all the IRS Code and guidance, and made it accessible to the average person and applicable to your situation.

So if you need to write an effective letter (one that really stands the greatest chance for success) you'll find my e-book to be an extremely cost effective solution to making those nasty late-filing penalties go away.

In fact, one recent purchaser of my Form 990 Penalty Relief Manual, a CPA from New York, said "This is my most cost-effective purchase EVER!" Another purchaser said he received a 1,000% return on his investment in the e-book. Where else can you get a 1,000 percent return on your money?

Can't you just write a nice letter to the IRS explaining what a wonderful organization you are and how you were sick and were in the hospital and missed the filing deadline and your organization only has $400 in it's bank account and there's no way you can pay a $4,500 penalty, blah, blah, blah?

Sure, and it might actually work in some cases. But it doesn't always work, and saying the wrong things could backfire on you. I've had several people email me and say that when they wrote their own letter, their request for abatement was denied, but when they wrote a second letter using the method in my e-book, the IRS abated the penalties.

When your organization is facing a penalty of several hundred or several thousand dollars, wouldn't you rather get it right the first time?

Learn more about what my Form 990 Penalty Relief Manual e-book can do for you.