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CTAs: Watch Your Tax-Exempt Status

On May 16, the IRS began revoking tax-exempt status from nonprofits that failed to file three consecutive annual returns (Form 990-N, 990-EZ, 990, or 990-PF). Approximately 25% of not-for-profits may lose their tax-exempt status for failure to file a 990 form.

Loss of tax-exempt status means an organization, such as a CTA, must file income tax returns and pay income tax, and its contributors will not be able to deduct their donations.

Before 2006, organizations with less than $25,000 in gross revenues were exempt from filing, but the law was changed to require those smaller organization to file an “electronic postcard” on new Form 990-N. It is a short process that entails typing in basic information about the organization (name, address, EIN) and stating that it has less than $25,000 in income for the year.

Failure to enter that information online or file anything for three years now leads to revocation of exempt status. Visit www.irs.gov for additional information on filing.

Posted on July 14, 2010
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