CTAs: Watch Your Tax-Exempt Status

July 14, 2010

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.