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What Happens If You File Your Form 990 Late? Here’s What to Know

May 1, 2024

When it comes to nonprofit organizations, timely filing of Form 990 is crucial. Missing the deadline can lead to significant consequences. Here’s what you need to know if you forgot to file 990:

There Are Penalties for Late Filing

The IRS will impose penalties based on your organization’s gross receipts. Depending on the receipts, you could find yourself experiencing a heavy fine (although a smaller one isn’t great either):

  • Gross Receipts ≤ $1,000,000: A penalty of $20 per day, up to a maximum of $10,000 or 5% of the organization’s gross receipts).
  • Gross Receipts > $1,000,000: A penalty of $100 per day, up to a maximum of $50,000.

These penalties can add up quickly, creating financial strain on the nonprofit. To minimize these costs, it’s essential to file as soon as possible.

Additionally, you could experience:

Automatic Revocation

If a nonprofit fails to file Form 990 for three consecutive years, the IRS will automatically revoke its tax-exempt status. This revocation means the organization will be subject to federal income tax and may face state and local taxes. Reinstating this status involves a lengthy and costly process, which can significantly disrupt operations.

Potential Loss of Donor Confidence

Late filing or failing to file Form 990 can damage an organization’s reputation. Donors and stakeholders rely on these filings to assess the nonprofit’s financial health and transparency

Inconsistent filing may lead to a loss of trust and potential funding. Transparency is critical to maintaining donor confidence and ensuring continued support for the nonprofit’s mission.

What to do If You Miss the Deadline to File

So, you missed the filing deadline and need to catch up. Here are your next steps to take:

  1. File as Soon as Possible: Even if late, filing promptly can reduce the accruing penalties. The sooner the organization files, the lower the penalty will be.
  2. Request an Abatement: If there was a reasonable cause for the delay, the IRS may waive penalties upon request. This requires a detailed explanation and supporting documentation. Common reasons for abatement requests include natural disasters, serious illness, or other significant unforeseen events.
  3. Seek Professional Help: Consulting with a tax professional or accountant who specializes in nonprofit accounting can help navigate the filing process and mitigate potential penalties. These professionals can also assist in developing a plan to prevent future late filings.

How to Prevent Filing Your Form 990 Late

Although it’s easier said than done, as it can be incredibly busy running your nonprofit, and mistakes do happen (as much as we wish they didn’t), there are a few ways to prevent filing your Form 990 late.

Here are some of the things we recommend:

  • Set Reminders: Use digital calendars or reminder systems to track important deadlines. Setting up multiple reminders well before the due date can help ensure the organization has ample time to prepare and file Form 990.
  • Engage Professionals: Regularly consult with accounting professionals to ensure compliance. Professional guidance can help maintain accurate records and streamline the filing process.
  • Board Oversight: Ensure the board of directors is aware of and oversees the filing requirements and deadlines. Board members should be informed of the importance of timely filing and the potential consequences of non-compliance.

Long-Term Consequences of Non-Compliance

Non-compliance with Form 990 filing requirements can lead to long-term financial and operational challenges for nonprofits:

  • Increased Scrutiny: Repeated late filings can attract IRS audits, resulting in additional administrative burdens. Audits can be time-consuming and costly, diverting resources away from the nonprofit’s mission.
  • Funding Issues: Many grantmakers and donors require proof of recent Form 990 filings before committing funds. Delays can jeopardize these opportunities. Consistent filing can enhance the organization’s credibility and appeal to potential donors.
  • Operational Hurdles: Losing tax-exempt status means the organization must file as a taxable entity, leading to higher operational costs. The loss of tax-exempt status can also impact the organization’s eligibility for grants and other funding sources.

Understanding Form 990 Extensions

By submitting Form 8868 before the original deadline, nonprofits can apply for an automatic 6-month extension to file Form 990.

However, this extension only applies to the filing deadline and not to the payment of any tax due. Applying for an extension can provide additional time to ensure accurate and complete filings.

The Importance of Compliance

Maintaining compliance with Form 990 filing requirements is critical for a nonprofit organization’s sustainability and growth.

Regularly reviewing and updating financial records, staying informed about changes in IRS regulations, and fostering a culture of accountability within the organization can help ensure ongoing compliance.

If you’re unsure about your nonprofit’s current financial health or need guidance on maintaining compliance, consider taking our financial health check quiz. This can provide valuable insights and help identify areas for improvement to ensure your organization remains in good standing. Click here to take the quiz!


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