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Received a penalty notice from  the IRS for late filing of your 990? Talk to them!

Penalties for late filing of form 990 and 990ez can be costly: $ 20 per day up to $ 10,000 for small non-profits and $100 per day up to $50,000 for organizations with annual receipts over $ 1 million.

But if you have a reasonable cause for the late filing and you have taken steps to ensure timely filings in the future you have a pretty good chance of getting the penalty removed.  To do this you need to outline to the IRS why you warrant a reprieve.  A short letter works well, and typically you only need to address 3 crucial points:

1.  Explain why the return was filed late. It needs to pass the lame test - "I forgot" is not a
     reasonable cause, nor is "the dog ate my extension". 

2.  Outline what steps you are taking to ensure that future filings are timely. You are asking
     for what should be a one time consideration, the IRS doesn't want to get a letter from you
     every year.

3.  It helps to note that you operated in good faith - an intentional disregard of the rules does
     not work in your favor, but a statement that you take complying with filing requirements
     seriously can be helpful.

The IRS simply wants you to file timely and doesn't revel in  assessing late filing penalties to non profits; they will listen to your explanation and if it's reasonable  will often remove the penalty.

                    The following is an example letter - be brief, be polite and be honest:


(date)

Internal Revenue Service
Ogden
, UT 84201

 Re: (enter Organization name & federal ID #)

 This letter is in response to the attached notice assessing a late filing penalty of (enter amount) for the organization's (enter year) form (enter 990/990ez, etc); we are requesting an abatement of this penalty for the reasons and circumstances outlined below. 

The (enter year) return was the initial filing for the organization and the return was inadvertently filed  after the required due date. This was a one time event due to it being the initial filing and steps including implementing an automated reminder system have been taken to prevent a recurrence.

 - or (another common reason for late filing) -

The board of directors changed shortly prior to the due date of the return, and there was confusion about who would file the extension, which unfortunately was not filed. The organization has taken actions to ensure that all future filings will be timely including retaining the services of an outside firm to prepare its future forms 990.

The organization is a 100% volunteer Parent Teacher Association for an urban public school (briefly, say what your organization does, hopefully it's good things)  and the late filing penalty would present a significant burden given its limited budget.( a brief plea of "have pity on us" doesn't hurt either). The organization operated in good faith, and we believe the facts and circumstances outlined above support an abatement of the penalty especially given that steps have been taken to ensure that all future filings will be timely.

 Please don't hesitate to contact me if you have questions or need additional information. We very much appreciate your assistance in this matter and consideration of this request.

Sincerely,

  (Signature & title)

 copy of penalty notice enclosed


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