Form 990 late filing penalties

If you file a required return after its due date, including any extension, the IRS can charge a penalty for each day it's late, unless your organization shows reasonable cause:

An incomplete return can draw the same penalty as a late one. If the IRS then writes to ask for the return and it still isn't filed by the date they give, the person responsible can be charged $10 a day, up to $6,500 per return. A late organization can ask the IRS to waive the penalty with a written statement of reasonable cause.

The IRS can abate the penalty when the organization shows reasonable cause: that it exercised ordinary business care and prudence and still couldn't file on time. They decide each case on its facts. The examples the IRS gives for a late return are a fire, natural disaster or civil disturbance; records that couldn't be obtained; the death, serious illness or unavoidable absence of the person responsible or their immediate family; and system problems that held up an electronic filing. Not knowing the rules or an oversight generally doesn't qualify, and the IRS says the organization is responsible even when someone else handles its filings.

The request is a written statement. The IRS says it should cover:

• what happened and when, and how it kept the return from being filed on time;
• what the organization did to meet the deadline, including any extension it asked for, and how it found out the return was late;
• the steps it has taken so it doesn't happen again;
• copies of the records that back this up, such as hospital or court records or IRS letters;
• a declaration that the statement is made under penalties of perjury, signed by an officer.

The IRS says to make the request as an attachment to the return when you file it. When you file a late Form 990, 990-EZ or 990-PF here, you can add a “Reasonable Cause Explanation” statement after you pay, and we file it with the return. If the IRS has already sent a penalty notice, such as a CP141L, send a signed statement to the address at the top of the notice, or call the number on it; the IRS's penalty-relief page says a written request can also go on Form 843. If they deny it, the notice or letter says how to appeal. If the IRS returned the return as incomplete, a complete one within 10 days of their letter avoids the penalty.

The IRS's First Time Abate waiver doesn't help here. It covers failure-to-file, failure-to-pay and failure-to-deposit penalties on tax returns, and the IRS's manual says it doesn't apply to the daily delinquency penalty under section 6652(c), naming Form 990 as a return it doesn't cover. Reasonable cause is the only route, and relief is up to the IRS.

There's no dollar penalty for a late e-Postcard. A skipped 990-N still counts as a missed year toward automatic revocation, and for the smallest organizations that is the bigger risk.

If an organization doesn't file a required 990-series return or notice for three consecutive tax years, it loses its tax-exempt status automatically, by law. The IRS lists revoked organizations on their Auto-Revocation List. From then on, the organization's income is taxable and contributions to it are no longer deductible.

To be reinstated, the organization applies for exemption again on Form 1023 or 1024 and pays the user fee. If it acts quickly, the IRS's streamlined procedures (Rev. Proc. 2014-11) can make the reinstatement retroactive, so there's no gap in its exempt status.