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E-Filing Will be Mandatory for All Tax-Exempt Organizations

By: David Leipnik

The IRS recently announced new rules for e-filing requirements for tax-exempt organizations. The Taxpayer First Act requires all tax-exempt organizations to electronically file Form 990.

Currently, only a limited number of nonprofits are required to file electronically. That all changes for tax-exempt organizations starting with tax years that begin after July 1, 2019.

Let’s look at the kinds of organizations and tax returns that are affected.

Who Is Required to File Electronically?

All tax-exempt organizations will soon need to file their tax returns electronically, thanks to the Taxpayer First Act (H.R. 3151), which was signed into law in July 2019.

When Does the E-filing Requirement Take Effect?

The new e-filing requirement is effective for tax years beginning after July, 1, 2019. For the majority of organizations, including those with June 30 fiscal year ends, the new e-filing requirement will not come into effect until the 2021 filing season (for 2020 returns).

The U.S. Treasury Secretary might delay the e-filing requirement for up to two years for organizations that are only required to file a 990-EZ, which essentially applies to organizations with less than $200,000 in gross receipts and $500,000 in total assets.

What Kinds of Tax Returns Are Affected By the New Law?

The new law applies to any tax-exempt organization filing Form 990, Form 990-EZ, Form 990-N and Form 990-T.

Under the old rule, e-filing was required only for (1) tax-exempt organizations with total assets of $10 million or more and that file at least 250 returns a year, (2) private foundations that file at least 250 returns a year regardless of their size, and (3) tax-exempt organizations with annual gross receipts of $50,000 or less and were able to file a form 990-N (postcard).

Other New Requirements

The Taxpayer First Act requires the IRS to make the Form 990 filed by tax-exempt organizations available to the public in machine-readable format as soon as feasible. This will allow the public and other users to have better access to tax returns and enable them to scrutinize and analyze tax exempt-organizations’ returns and encourage transparency.

The new law also requires the IRS to provide notice to tax-exempt organizations that have failed to file their Form 990 for two consecutive years. The notice from the IRS must include a statement that the organization’s tax-exempt status will be automatically revoked if it fails to file its return for a third consecutive year by the required return’s due date. Prior to the passage of this new law, the IRS was not required to give notice before revoking an organization’s tax-exempt status for not filing for three years.

Pro tip: Be sure to search the IRS’s database of tax-exempt organizations to make the sure the IRS has your organization’s current address on file. This will ensure that any potential correspondence goes to the correct address.

Need Help?

If you have questions about how The Taxpayer First Act affects your tax-exempt organization contact our tax department here or call 800.899.4623 for help.

Published December 12, 2019

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