Many non-profit organizations are understandably shaken and disturbed by the revelations coming out of the current scandal at the Internal Revenue Service. The IRS has been accused of using its power to prevent or delay ideologically conservative non-profit organizations from securing their tax-exempt status. Whether the reason for the delay is politically motivated or not, what lessons can we learn from the alleged abuse of power by the IRS?
First, it is critical that all non-profits stay current with the required governmental filings. These filings include everything from Form 1023 filed at inception to payroll tax reports and Forms 990 that are filed annually. Not all non-profits have the same filing requirements, but all of them have at least one filing requirement. Consult with a CPA experienced in non-profit taxation to ensure your organization knows exactly what it is required to file. If you are a church, you do not have to file a 990.
However, churches will have to file payroll tax reports. Make sure that you keep up with what filing requirements your organization has. These requirements can change as demonstrated by the changes to the 990 rules in 2008. There are a large number of non-profits that have lost their tax exempt status because starting in 2008, all non-profit organizations except for churches are required to file a 990 annually. If the organization did not file within 3 years, the organization lost its tax exempt status. There is no provision for reinstatement. The organization has to file the form 1023 again and the IRS is not making the tax exempt status retroactive. It is worth the nominal expense to check with an experienced CPA every 2 or 3 years to ensure your organization continues to be in complete compliance with IRS regulations as they change.
Second, it is critical that in all dealings with the IRS, your organization dots the “i’s” and crosses the “t’s.” Not only is it important to file the required reports, it is equally essential to file the reports accurately and timely. The IRS is neither patient nor forgiving of employers who do not pay their payroll taxes timely. There are penalties for the late payment of payroll taxes or for not filing W-2s or 1099s that can be easily avoided by following the rules.
In the current environment where there is concern that non-profits are being scrutinized more carefully than ever before, it is essential to know the rules your non-profit must follow and to regularly check that your filings with the IRS continue to be in utmost compliance with all applicable regulations. If we can assist you in any way or refer you to someone in your area who can, please contact us at Cynthia A. Cox, CPA, LLC at 281-399-8153.