NonProfit Board Meeting

2020 Not-For-Profit Tax Update – Taxpayers First Act of 2019

The Taxpayers First Act of 2019 has two provisions that relate specifically to tax-exempt organizations; a mandate for electronic filing, and reform to IRS notice requirements related to failure to file.

Before the Act was in place only tax-exempt organizations meeting certain thresholds were required to electronically file their return, while all others had the option to paper-file. The following tax-exempt returns and their related forms are now required to be filed electronically:

  • Form 990: Return of Organization Exempt from Income Tax
  • Form 990-PF: Return of Private Foundation or Section 497(a)(1) Trust Treated as Private Foundation
  • Form 8872: Political Organization Report of Contributions and Expenditures
  • Form 1065: U.S. Return of Partnership Income (if filed by a Section 501(d) apostolic organization)

For those organizations that file Form 990 or 990-PF, this mandate is applicable to tax years ending July 31, 2020, and later. Form 8872 will no longer be accepted by the IRS if paper filed for periods after 2019. The mandate includes transition relief for small tax-exempt organizations who file Form 990-EZ, where the IRS will accept either paper or electronic filings for tax years ending before July 31, 2021. Certain forms are not yet available for electronic filing by the IRS, including Forms 990-T and 4720. The IRS is working to convert these forms into electronic format and plans to have these forms available for e-filing in 2021.

Additionally, the Taxpayers First Act now requires the IRS to send a notice to organizations who have not filed their annual Form 990-series return or postcard for two consecutive years and are therefore at risk of losing their tax-exempt status. This requirement will provide an organization the time needed to file the required annual returns. An organization’s tax-exempt status will be revoked should they fail to file their annual information return for three consecutive years. Previously, the IRS had the ability to automatically revoke an organization’s tax-exempt status after three years of non-filing without sending a notice to the organization. Any organization who loses their status due to failure to file must reapply for tax-exempt status with the IRS.

About the Author(s)

Teal Strammer, CPA
Teal is a senior associate in the Sarasota, FL office of HBK and began her career with the firm in 2016. She specializes in tax preparation and assurance services for not-for-profits. Additionally, she has experience with employee benefit plans, construction, manufacturing industries. Tax preparation services include individuals, businesses, trusts and estates. She is also part of HBK’s REVEAL team leading recruiting efforts for the Sarasota office.

Ashlynn Reeder, CPA, MST
Ashlynn Reeder is a Manager in the Naples, Florida office of HBK CPAs & Consultants. She has been with the firm since 2015, specializing in nonprofit organizations, individuals, trusts, and estates. Ashlynn is the leader of the firm’s Tax-Exempt Organizations Tax Specialists Group, which serves as a resource to the firm and directly supports HBK’s Tax Advisory Group.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.