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Nonprofit Tax Tip – §501(c)(3) Reinstatment

by Miriam - July 12th, 2012.
Filed under: Nonprofit, Tax Tips.

More than 275,000 nonprofits lost exempt status in July of 2010. Since that time, the IRS has continued to revoke the exempt status of nonprofits that fail to file a 990N, 990EZ or 990 for three consecutive years.

Consequences for having exempt status revoked are severe – the nonprofit loses its §501(c)(3) status, no longer qualifies for most grants, donations are no longer tax-deductible and (horrors!) net income could be taxed at for-profit corporation rates!

In order to regain §501(c)(3) status, nonprofits must file a new Form 1023 Application for Tax Exempt Status. This is a lengthy and somewhat complex form. There is also a salty filing fee – $400 for nonprofits with gross receipts less than $10K per year and $850 for nonprofits with gross receipts $10K or greater.

For small nonprofits, this fee can be reduced to $100 upon request to and approval by the IRS. However, in order to take advantage of this reduced fee, a nonprofit MUST FILE the Form 1023 by December 31, 2012.

If your nonprofit lost its exempt status, and you think you will re-file – don’t delay! File today!

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