990 late filing

New client appears this week with a 1040 including a self filed extension. They also have a 990, due May 15 with no extension.

Best hope I can see for penalty abatement is the first time relief. Any suggestions as to whether to file on paper, including a letter requesting relief, electronic with a separate letter, or file and respond to the notice when it arrives?

Thanks.

In my experience, sending a letter with the return is simply wasted effort. It doesn't get read. I recommend filing ASAP and begging for forgiveness when the penalty notice arrives.

Practical article, but does not cover first ti,e abatement. https://www.journalofaccountancy.com/is ... m-990.html

Last time this came up in my practice, about 12 years ago, the IRS was generous in granting reasonable cause late filing penalty relief for very small all volunteer non-profits especially with turnover of volunteer officers. The Service was not interested in bankrupting tiny community organizations. A few years ago, a small non-profit volunteer told me an IRS non-profit division staffer had essentially told her the same thing. Of course if first time abatement applies, that's the easy route. But with those small non-profits, might be better to first try the reasonable cause route and keep the FTPA ammo available for next time that will surely come. Please post your results.

Last time this came up in my practice, about 12 years ago, the IRS was generous in granting reasonable cause late filing penalty relief for very small all volunteer non-profits especially with turnover of volunteer officers. The Service was not interested in bankrupting tiny community organizations. A few years ago, a small non-profit volunteer told me an IRS non-profit division staffer had essentially told her the same thing. Of course if first time abatement applies, that's the easy route. But with those small non-profits, might be better to first try the reasonable cause route and keep the FTPA ammo available for next time that will surely come. Please post your results.

Agree. Have the treasurer plead with the IRS for forgiveness and vow to make sure the next treasurer in line knows the due date. I have been successful twice in coaching the client on this. FTA is successful too but I don't use it unless the poor pleading treasurer is unsuccessful.only had two of these but both times the taxpayer won.

Edit.....both of these were only late by 12 months or less. Not sure if it mattered.

I don't have this stat recorded, but I am pretty sure I have a 100% abatement record when it comes to non-profits. Plead poverty for the organization, any positional turnover whether staff or governance, steps taken to shore up deficiencies, etc.

I don't have this stat recorded, but I am pretty sure I have a 100% abatement record when it comes to non-profits. Plead poverty for the organization, any positional turnover whether staff or governance, steps taken to shore up deficiencies, etc.

Agree as well. Be sure to highlight why the organization will be unduly punished by such a penalty. In extreme cases (>18months late) I've sometimes mentioned that the only reason these penalties have now been levied is because new board members of the organization are aware that all such filings need to be made. Levying this penalty will punish those who will keep the organization in compliance (and, of course, the beneficiaries of the mission) not those who let it fall out of compliance.

I think all volunteer org helps...

All volunteer argument is not going to help here, darn thing is a 990-PF.

Going to file and respond to the resulting notice. Will be back looking for magic words.

All volunteer argument is not going to help here, darn thing is a 990-PF.

Going to file and respond to the resulting notice. Will be back looking for magic words.

I don't think you have the same luck with a 990-PF. Very different set of circumstances and public policy dynamics.

All volunteer argument is not going to help here, darn thing is a 990-PF.

Going to file and respond to the resulting notice. Will be back looking for magic words.

I don't think you have the same luck with a 990-PF. Very different set of circumstances and public policy dynamics.

Uh oh.....what type of private foundation is this? It can still be all volunteer.....

I don't have this stat recorded, but I am pretty sure I have a 100% abatement record when it comes to non-profits. Plead poverty for the organization, any positional turnover whether staff or governance, steps taken to shore up deficiencies, etc.

Same for our practice.

Ooops, responded before I saw the PF bit. Expect to pay.

Well, for good news, the client elected to go elsewhere. They didn't like my rate and the paragraph in the engagement letter stating there was absolutely no assurance that penalties would not apply. I suspect that this is a winner for me.

Does your letter really use the word "absolutely"?

Not absolutely absolutely, but language was included to make it very clear that penalties are likely to be assessed and that there was no assurance they would be abated.

Frankly, the potential client struck me as a bit of a cheap-o. Fired their last CPA for "lack of communication" did an extension for their personal return, but not the 990PF and was "shocked" that penalties might be problem. Waited until now to find a new preparer, when they could have addressed this before the filing date of the 990.

More I think about it, happier I am that they are somebody else's problem.

Has anyone gotten late 990-PF filing penalties reduced in recent years? Talked with a non-profit tax attorney today who said he has seen a small percentage of successes but they were all based on reliance on negligent cpa or tax attorney. The ones based on volunteer staff, illness of officer crashed and burned.

I have a client that is a chapter of a fraternal organization that has not filed 990s since 2014. I went back and file 1120s to bring it up to date.

Now I would like to apply to have the non profit status retroactively reinstated. They were on the 2014 990 a (c) 2, but they have ownership of a building and have been renting out the hall to other organizations and collecting rent. I dont think they meet the definition of a (c)2. I am wondering if I ask to be reinstated as s (c)10 will that cause a problem.

The organization has gross rental income of approx 60,000 a year, all volunteer, no salary, and they use the Building to meet and organize charity events.

I am thinking for a reasonable cause the above, change of treasurers, BOD.

Also the reason I am attempting reinstatement, is they are selling the building in 2023 and there will be a large gain which I would like to avoid. Also the proceeds of the sale will go back to the parent fraternal organization.

Any advise would be greatly appreciated !!

Enjoy your summer !!

Art Lander

The organization needs to file a NEW application of Form 1024 with applicable fee,
noting "APPLICATION FOR REINSTATEMENT" on top of front page, with an explanation
for lapse in filing. After 3 consecutive years' of no filing - the organization's exemption
is automatically revoked.

thank you Mr. Big E

Have you had much luck with reinstatements?


Art

I've seen reinstatements.
But this will require back filing of some delinquent 990s.
There is info about the process on the IRS website.
How many years 1120s did you file?