Reinstating Tax-Exempt Status

In the city of Taxtropolis, there are only two kinds of people… Those who file their tax return on time and those who do not. These city streets are unforgiving to any level of offenders. But… there is a change sweeping through. A hero, known only as Rev. Proc. 2014-11, is making it possible for offenders to streamline the process of regaining their tax-exempt status.

No one knows how or why Rev. Proc. arrived from the land of IRS-tron. But witnesses say that Rev. Proc. works in three main ways in which an organization that has lost its tax-exempt status can apply for retroactive reinstatement to the date of revocation.

Level 1 Offenders
The first level of offenders consists of those who have

• Lost their tax-exempt status for the very first time
• Failed to file a required Form 990-N (e-Postcard) or Form 990-EZ for three consecutive years
• Applied for retroactive reinstatement with a Form 1023, or a Form 1024, within 15 months from the day their status was revoked

For first level offenders, Rev. Proc. can permit you to regain your tax-exempt status as of the date of revocation without any questions asked. You will not be required to file a Form 990-N (e-Postcard) for the prior year or a Form 990-EZ for any year in which you were required.

Your organization can be reinstated, if you:

• Re-submit an Application for Exemption with “Streamlined Retroactive Reinstatement” written across the top
• Pay the applicable user fee

Level 2 Offenders
The second level of offenders are those who have

• Failed to file a required Form 990 (Long Form) for three consecutive years
• Applied for retroactive reinstatement within 15 months from the day their status was revoked

Section 5 of Rev. Proc. allows organizations in this predicament to make an argument for reasonable cause. If reasonable cause is established for any of the three consecutive years you failed to file, you can qualify for reinstatement by

• Applying for retroactive reinstatement within 15 months from the day your status was revoked
• Paying the applicable user fee
• Establishing your organization had reasonable cause why it failed to file for one of the three consecutive years
• Completing and file the proper tax returns for all the tax years in the consecutive 3-year period that you missed
• Including a statement with the reinstatement request confirming that you have filed the required annual returns

Level 3 Offenders
The third level of offenders are

• ANY tax-exempt organization, whether you’re required to file a Form 990-N, 990-EZ, or 990, that is applying for reinstatement AFTER 15 months from the day the status was revoked

Along with following the reinstatement steps for Level 2 Offenders, Section 6 of Rev. Proc. requires you to provide a reasonable cause for each of the three consecutive years you failed to file.

Second chances are sometimes hard to come by in any situation. Reduce the need to be rescued by Rev. Proc. in Taxtropolis by quickly and easily e-filing with Express990. We offer support for any of the 990 forms for tax-exempt organizations and you can e-file your Form 990-N (e-Postcard) FREE for the current tax year.

For any questions or assistance with our service to e-file, feel free to contact our live, expert help at our headquarters in Rock Hill, South Carolina.

Phone: (704) 839-2321 (Monday - Friday, 9am - 6pm, Eastern Standard Time)
Email: support@expresstaxexempt.com
Live Chat: www.expresstaxexempt.com

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990 News: Revenue Procedure 2014 - 11

Revenue Procedure 2014-11 is a publication by the IRS outlining the process for gaining retroactive reinstatement for exempt organizations. Should an organization fail to file a Form 990 (and any form from the 990 series) for three consecutive years, its tax-exempt status is automatically revoked. This can mean big fines, penalties, and taxes. Thankfully, the IRS has created this process for first-time offenders.

There are three options for tax-exempt organizations to regain their exempt status and have it retroactively reinstated; we will discuss each individually. The first two are applicable only to those organizations who have had their exempt status revoked no more than 15 months prior to reapplying.

An organization that was eligible to file either Form 990-EZ or 990-N for each of the three consecutive years that it failed to file, and that has not previously had its tax-exempt status automatically revoked, may apply to have its tax-exempt status retroactively reinstated effective from the Revocation Date if it does both of the following:

1. Completes and submits an Application at the address provided in the instructions to the Application not later than 15 months after the later of the date of the Revocation Letter of the date on which the IRS posted the organization’s name on the Revocation List. To help facilitate processing, organizations should write “Revenue Procedure 2014-11, Streamlined Retroactive Reinstatement” on the top of the Application.
2. Include the appropriate user fee with the Application. 

An organization that is not eligible for the aforementioned procedure may apply to have its tax-exempt status retroactively reinstated effective from the Revocation Date if it does all of the following:

1. Completes and submits the appropriate Application to the address provided in the instructions to the Application not later than 15 months after the later of the date of the Revocation Letter or the date on which the IRS posted the organizations name on the Revocation List. To help facilitate processing, organizations should write “Revenue Procedure 2014-11, Retroactive Reinstatement” on top of the Application.
2. Includes the appropriate user fee with the Application
3. Includes the Reasonable Cause Statement
4. Includes a statement with the Application confirming that it has filed the Annual Returns required in the below step
5. Files properly completed and executed paper Annual Returns for all taxable years in the consecutive three-year period for which the organization was required, and failed, to file Annual Returns (and for any other taxable years after such period and before the Post-Mark Date for which required returns were due and not filed). The Annual Returns must be mailed to the follow address:

Department of the Treasury

Internal Revenue Service Center

Ogden, UT 84201-0027

For those organizations beyond the 15-month mark, the IRS has another method for regaining reinstatement that requires a bit more work. An organization that applies for reinstatement of its tax-exempt status more than 15 months from the later of the date of the Revocation Letter or the date on which the IRS posted the organization’s name on the Revocation List may have its tax-exempt status retroactively reinstated effective from the Revocation Date only if it satisfies all the requirements of the aforementioned section, and except that it must provide the Reasonable Cause Statement for all three years instead of just one.

As you can see, the process is very in-depth but well worth the effort. We recommend it to any organization that needs to be reinstated and wishes to have retroactive exempt status as well. Make sure that you have all of your information before attempting to file for reinstatement. Contact the IRS to ensure that you have all the necessary documentation and have taken all of the necessary steps for filing.

Life Cycle of an Exempt Organization

With things changing so quickly, it’s hard to pin down exactly what stage your organization is in. Luckily the IRS has narrowed the process down into 5 steps, or the “Life Cycle” of your exempt organization. All tax documents relating to exempt organizations are written to fit into these 5 stages:

1. Starting Out: Creating an organization under state law, acquiring an employer identification number, and identifying the appropriate federal tax classification

2. Applying for Exemption: Acquiring, completing, and submitting application forms; how the IRS processes applications; and getting help from the IRS during the application process

3. Required Filings: Annual exempt organization returns, unrelated business income tax filings, and other returns and reports that an organization may have to file

4. Ongoing Compliance: How an organization can avoid jeopardizing its tax-exempt status, disclosure requirements, employment taxes, and other ongoing compliance issues

5. Significant Events: Audits, private letter rulings, and termination procedures

Somewhere within these 5 stages is where your organization falls with the IRS, and Express990 is here to help make sorting through the chaos a little bit easier. Our free 990-N service helps smaller organizations remain compliant at no cost to them. We also provide the chance to extend your filing deadline with Form 8868, so you can get a little breathing room between you and that pesky 990 deadline. We've designed our site for the everyday taxpayer, not the tax professional, so you can file your forms quickly and get back to doing what you love.

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