Annual Exempt Organization Return: Penalties for Failure to File

 

If an organization fails to file a required return by the due date (including any extensions of time), it must pay a penalty of $20 a day for each day the return is late.  The same penalty applies if the organization does not give all the information required on the return or does not give the correct information.

Note: In 2018, the IRS began sending back incomplete or incorrect Form 990-series returns to the filing organization with Letter 2694C, 2695C or 2696C. Organization receiving one of these letters should follow the directions in the letter. Also, see What happens if my Form 990 is missing information or a schedule, or is the wrong return? Return a complete and accurate return within 10 days of the date of the letter to avoid penalties. The date we receive a complete and accurate return is the date we consider your return filed.
 
In general, the maximum penalty for any return is the lesser of $10,000 or 5 percent of the organization's gross receipts for the year.  For an organization that has gross receipts of over $1 million for the year, the penalty is $100 a day up to a maximum of $50,000.

If the organization is subject to this penalty, the IRS may specify a date by which the return of correct information must be filed.  If the return is not filed by that date, an individual within the organization who fails to comply may be charged a penalty of $10 a day.  The maximum penalty on all individuals for failures with respect to a return shall not exceed $5,000.

Penalties for failure to file may be abated if the organization has reasonable cause for the failure to file timely, completely, or accurately.

Please note: Automatic revocation occurs when an exempt organization that is required to file an annual return (e.g., Form 990, 990-EZ or 990-PF) or submit an annual electronic notice (Form 990-N, or e-Postcard) does not do so for three consecutive years. Under the law, the organization automatically loses its federal tax exemption.

Requesting abatement of tardiness penalty on electronic filing after rejection of paper form

Failure to file the information form in the prescribed time and manner can give rise to a penalty under the tax law.
 
A filer may request abatement of a penalty in a written statement setting forth all the extenuating circumstances.  You may make the request in response to a penalty notice that you receive or, in the case of Forms 990 or 990-PF, when you electronically file the return.  Explain what facts previously prevented the electronic filing.  Include the date of the attempted paper filing.
 
For more information, see the Penalty Relief webpage

Interactive Training

Learn more about the benefits, limitations and expectations of tax-exempt organizations by attending 10 courses at the online Small to Mid-Size Tax Exempt Organization Workshop.