UPDATE: IRS Commisioner Doug Shulman announced on May 18 that his agency will offer guidance soon for small nonprofits that missed the May 15 filing deadline. If your organization missed the
deadline, you should still file your return as soon as possible.

Some wise person or wiseacre once said "A little knowledge is a dangerous thing." For the most part, I agree, especially when it comes to tax law, brain surgery, changing diapers, and other endeavors where
one or more parties might get hurt somehow.

My intentional ignorance also gives me an excuse for exiting the room whenever one of these complex, dangerous tasks arises. However, lately I've been noticing some e-mail threads bouncing around our office
suggesting that taxes are a pretty big deal as far as nonprofits are
concerned, and conincidentally, an increasing number of my co-workers
feel the same way about changing diapers (Shalom to them and their
growing families). One thread has an alarming subject line taken from a
recent New York Times article: One-Fourth of
Nonprofits Are to Lose Tax Breaks.

Apparently this looming threat to nonprofits stems from a little-noticed-at-the-time provision in a 2006 pension reform bill with fairly benign intentions. The provision was included mainly because the
government wants more data about nonprofits, not to punish NPO's or take
a cut of their money.

Prior to the passage of this law, the IRS didn't require NPO's with a total annual revenue under $25,000 to file tax returns (the infamous Forms 990 and 990EZ). However, as of FY2006 (the 2007 tax return) all
nonprofits have to file their 990s. However, the law also
states that these small NPOs would have three years to get on board with
the new system, and that grace period is over as of the end of FY2009.

So if you work for a small nonprofit and you missed this Earth-shaking legislative news in 2006, it's time to wake up. Your paperwork holiday is over! And the penalty for hitting the snooze button
again is pretty severe — the 2006 law gives the IRS permission to
revoke tax exempt status from any NPO who hasn't filed a 990 or 990EZ
over the past three filing seasons. However, the IRS isn't adopting a
gung-ho, aggressive posture as far as enforcement is concerned. The
first wave of delinquent NPOs officially lose their tax exemption as of
May 15 (yes, less than two weeks from now), but donations will be
deductible until the organization receives its formal notification
letter, which won't happen until early next year.In fact, NPOs don't
need to panic on April 15th the way most Americans do. For NPOs, the
filing deadline is 5 months and 15 days after the end of their previous
fiscal year. Therefore, the first wave of deadlines is coming soon.

Also, as outlined in Put Barber's recent post on the Idealist.org blog, only the largest nonprofits have to file the full 990. Look at your latest balance sheet.
What's your organizational revenue stream look like?:

• Less than $25,000 per year: The smallest NPOs can file the 8-item 990N (a.k.a the epostcard), which can be done online.
• More than $25,000 and less than 500,000 annual income and less than $1 million in assets? Nonprofits in this category can file the 990EZ
• More than $500,000 in annual revenue or more than $1 million in assets? It's the full 990 for you I'm afraid.

So if this regulation affects your nonprofit, what can you do besides recruiting the pro bono services of a skilled accountant? More information wouldn't hurt. The IRS has a landing page devoted to tax regulations affecting charities
and nonprofits. The Nonprofit Coordinating Committee of New York
has published a helpful article on How to Read the IRS Form
990 and Find Out What it Means. The National Center for Charitable
Statistics (NCCS) provides a free e-filing tool at Form 990 Online (free only for NPOs
with less than $100,000 in annual revenue) which can help you file
either the 990EZ or the full 990. Finally, if your organization has
registered with TechSoup, you may be eligible for a donation of
accounting software. Our catalog includes the following programs, all of
which help nonprofits fill out and submit their Form 990:

• Intuit QuickBooks Premiere Editions 2010 (including the Nonprofit E...
• PeachTree Premium Accounting for Nonprofits 2010
• Acclivity AccountEdge

Have you filed your 990 yet? Do you have any questions about the new law? Discuss the change in this TechSoup Town Hall forum discussion.