Nonprofit Tax Help

David McRee, CPA

Are you wondering whether you or your organization has a good enough excuse for filing your Form 990 late? 

Will the IRS will accept your explanation and abate your late-filing penalties.

Following are actual situations where organizations or their CPA's had Form 990 late-filing penalties abated after using my method for writing a letter to the IRS to have penalties removed. Naturally I give very limited descriptions so as not to give away the identity of the organizations. Here are a few of the success stories:

Youth Sports Team - This was a new organization that inadvertently overlooked the filing of its first two Form 990 returns.

Urban Health Clinic - Outside accountant left the country and never completed the bookkeeping or tax returns for two years.

Low Income Housing Organization - Illness and hospitalization of Treasurer, high turnover of volunteer financial officers. Multiple years delinquencies. Over $27,000 in penalties abated.

Lodge type organization - IRS said it did not receive any request for extension of time to file. Organization's outside CPA maintained, successfully, that he/she did file a first extension request but not the second one. Cited communication problems with the organization and lost mail, in addition to administrative oversight.

Music Association - Multiple years penalties. Volunteer responsible for filing Form 990 left without completing it.  Missed deadlines. Took nearly a year to correct the delinquency. First abatement request denied. $10,000 in penalties abated on appeal.

State Bar Association - This organization had an excellent history of filing on time. Turnover in directors resulted in the return filing date being overlooked. Files damaged by storm compounded the delay in filing. More than $8,000 in penalties abated.

PTA organization - All-volunteer organization was ignorant of the requirement to file Form 990.

Family Support Center - CFO left the organization without preparing the Form 990 and without requesting an extension of time to file. 

Private Foundation - Didn't realize a separate extension of time to file is required for Form 990-T.  

Religious Education & Community Outreach Organization - Injury, illness and death of one of the founders interrupted the ability of the organization to meet its filing obligations for several years. Penalties abated.

Foreign Missionary Organization - This organization had a good filing history but suffered a lapse in filing for several years because of a breakdown in communication between the volunteer responsible for the returns and management. All-volunteer organization. More than $10,000 in penalties abated.

Museum - Multiple years delinquent. Severe financial distress, complete turnover in directors and a misunderstanding of filing thresholds. More than $60,000 in penalties abated. (That's right--sixty thousand dollars).

Religious Education Organization - Incompetent CPA failed to file extension requests, prepared incomplete forms, failed to respond to IRS notices. Multiple years delinquencies. Tens of thousands in penalties abated.

Small Yacht Club - Ignorance of the requirement to file Form 990. Discovered failure to file when applying for a loan. More than $6,000 in penalties abated.

High School Booster Club - Ignorance of the filing requirement to file Form 990. Multiple years delinquent. More than $20,000 in penalties abated.

Unknown Type - CPA forgot to file extension request for nonprofit client with previous history of late filing. Initial request for abatement denied. All penalties abated on appeal.

Private Inner-City School - CPA firm conducting the audit never filed the Form 990 even though continuing to promise they would. Finally after multiple IRS notices the executive director self-prepared and filed the return. Late penalties were assessed. Faxed request for abatement was denied. Formal abatement request prepared using my method resulted in abatement of the entire $20,000 penalty.

The problem most nonprofits and CPA's run into is that they simply don't realize all the reasons or "excuses" that are available to them when requesting penalty abatement. That's where my nonprofit penalty abatement guidance comes in handy. I help you understand which facts and circumstances related to your situation will help you argue for reasonable cause, and I help you tie those facts and circumstances in with the Treasury regulations and published IRS guidance to build the strongest case possible.

Many of the letters I've reviewed written by other people focus on reasons that the IRS really doesn't care about, while failing to mention reasons that would almost guarantee abatement of penalties.


How to remove form 990 late filing penalties book cover

Get the information you need to write a successful reasonable cause letter for your nonprofit.