If your nonprofit currently holds tax-exempt status, you are required to file annual information return (Form 990, 990-EZ, or 990-PF) with the IRS; failing to do so for three consecutive will result in the automatic revocation of your tax-exempt status! While the IRS hasn’t fully detailed the exact process, it will be publishing a list of organizations that have lost exemptions on its website in 2011.
Revocation of your tax-exempt status will lead to severe consequences. GuideStar recently published a study explaining that, “Revocation has a drastic and expensive impact on a nonprofit. If it’s a charitable organization, it will no longer be able to accept tax-deductible contributions. Whatever type of exempt organization it is, it will need to pay federal income taxes. it may also incur penalties for failure to pay income taxes, to say nothing of the loss of the trust of its donors, members, and clients.”
For more information on the GuideStar report, “Automatic Revocation of Nonprofits’ Tax-Exempt Status,” click here
