G. Failure-To-File Penalties

Against the organization. Under section 6652(c)(1)(A), a penalty of $25 a day, not to exceed the lesser of $13,000 or 5% of the gross receipts of the organization for the year, can be charged when a return is filed late, unless the organization can show that the late filing was due to reasonable cause. Organizations with annual gross receipts exceeding $1,309,500 are subject to a penalty of $130 for each day failure continues (with a maximum penalty for any one return of $65,000). The penalty applies on each day after the due date that the return isn’t filed.

Tax-exempt organizations that are required to file electronically but don’t are deemed to have failed to file the return. This is true even if a paper return is submitted.

The penalty can also be charged if the organization files an incomplete return, such as by failing to complete a required line item or a required part of a schedule. To avoid penalties and having to supply missing information later:

1. Complete all applicable line items;

2. Unless instructed to skip a line, answer each question on the return;

3. Make an entry (including a zero when appropriate) on all lines requiring an amount or other information to be reported; and

4. Provide required explanations as instructed.

Also, this penalty can be imposed if the organization's return contains incorrect information. For example, an organization that reports contributions net of related fundraising expenses may be subject to this penalty.

Use of a paid preparer doesn’t relieve the organization of its responsibility to file a complete and accurate return.

Against responsible person(s). If the organization doesn’t file a complete return or doesn’t furnish correct information, the IRS will send the organization a letter that includes a fixed time to fulfill these requirements. After that period expires, the person failing to comply will be charged a penalty of $10 a day. The maximum penalty on all persons for failures for any one return will not exceed $6,500.

There are also penalties (fines and imprisonment) for willfully not filing returns and for filing fraudulent returns and statements with the IRS (sections 7203, 7206, and 7207). States can impose additional penalties for failure to meet their separate filing requirements.

Automatic revocation for nonfiling for 3 consecutive years. The law requires most tax-exempt organizations to file an annual Form 990, 990-EZ, or 990-PF with the IRS, or to submit a Form 990-N e-Postcard to the IRS. For more information on exceptions to this requirement, visit Annual Exempt Organization Return: Who Must File .

After the organization’s second consecutive failure to file their required return or notice, and if the second consecutive year is required to be filed after 2019, the IRS is required to notify the organization with information about how to comply with the filing requirements.

If an organization fails to file an annual return or submit an annual notice as required for 3 consecutive years, its tax-exempt status is automatically revoked on and after the due date for filing its third annual return.

Organizations that lose their exemption may need to file income tax returns and pay income tax, but may apply for reinstatement of exemption. For details, go to IRS.gov/EO .