New IRS filing regulations mean small nonprofits now must file; Oct. 15 deadline

PROVIDENCE – Thousands of nonprofit organizations across the country – and hundreds in Rhode Island – stand in jeopardy of losing their tax-exempt status starting in 2011 under new regulations that require all nonprofits to file annually with the Internal Revenue Service.

The IRS has said, as of July, 355,000 nonprofits across the country faced revocation.

Previously, nonprofits with annual budgets of less than $25,000 did not have to file. In an effort to better keep track of nonprofits, the IRS now requires annual filings from all and has instituted an Oct. 15 deadline for a one-time relief program for smaller organizations that did not know of the change. Also, the IRS now has authority to automatically revoke a group’s tax-exempt status for failure to file.

Jill Pfitzenmayer, director of the Initiative for Nonprofit Excellence at the Rhode Island Foundation in Providence, told Providence Business News she and her staff are in the process of alerting the “handful” of nonprofits that she works with about the revised IRS regulations. “We’ve been trying to get the word out about how important this is,” she said.

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The IRS provided a list of the nonprofits in Rhode Island that are in jeopardy of losing their tax-exempt status. The 40-page list includes approximately 1,440 nonprofits throughout the state and, as Pfitzenmayer noted, most of those in jeopardy are small, volunteer groups without paid staff. Estimates vary, but in general there are more than 7,200 nonprofits in Rhode Island, according to the secretary of state’s office.

The remedy, for those nonprofits with annual budgets of less than $25,000, involves the filing of Form 990-N, which can only be done online ( Pfitzenmayer said the filing is simple and takes only minutes.

Organizations with annual revenue above $25,000 may have to pay a fee to retain the exemption or re-apply for it, if various IRS deadlines have not been met; larger nonprofit groups in general are not eligible to take part in the one-time relief program. The IRS has said it will begin sending revocation letters in 2011.