Non-Profit Penalty

[Gretel]

Does anyone have any advise for me?

New client got penalty letter for 501(c)3 for late filing. 2nd extension was probably not filed by previous accountant and accountant doesn't respond to anything.

Before coming to my office client has written letter, asking for abatement but IRS denied. Now she is concerned that IRS levies her bank account (she is treasurer). I don't think IRS can do this and I will contact IRS on this issue but would really like to have some advise before I meet with my client on Tuesday.

Thanks already (now someone is obligated to reply).

Gabriele

[S T]

Maybe this will help

Maybe client did not address the proper issues in the request for abatement of penalties or use the proper form. Maybe try reasonable cause. Here is a link to abatement of penalties for 990 form http://www.labyrinthinc.com/sharedco...&singlefaq=1#8 I can not seem to find the form 4571 online, I do have it in my CFS Fill N Print, so I could always print it off and fax it to you.

Sandy

[jainen]

Non-Profit Penalty

>>concerned that IRS levies her bank account<<

I don't think she is personally liable for the corporation's tax, unless it's pesky payroll stuff, but that's not subject to extensions anyway. Actually, no tax is, so why wasn't it paid on time? Why is a non-profit even paying tax? If there is money that could be levied, why doesn't she just set up a payment plan? I don't understand this post.

[S T]

Late Filing

I thought Gabriele's post was regarding a form 990 or 990 EZ, Isn't the penalty just for late filing! No tax, right? I don't believe IRS will levy the Treasurer's own bank account, but maybe the Organization's bank account if notices go unanswered.

Form 990 is an information return and if filed late, the IRS can assess the $20 per day penalty, up to the lesser of $10,000 or 5% of the gross receipts(over $1Mil gross receipts higher penalties) unless the organization can show that the late filing was due to reasonable cause.

Also, there can be a penalty levied against the "responsible" person of the organization for not filing the information return, or filing an incomplete return.

Not sure, but I believe the organization could also lose it's tax exempt status.

Sandy





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[Gretel]

Thank so much, Sandy, for the link. Yes, you are right, we are just talking about $2,000 for late filing. Client was under impression previous account had filed 2nd extension when, in fact, it wasn't filed. Client responded right away, just not the right way. She wanted to leave me out of the old stuff even though I offered my help with it. Reasonable cause applies. I would love to have form 4571, my fax #775-205-2724. Thanks again.

Sorry, we couldn't meet in CA. Had I known you are pretty close to the Ontario Airport I would have contacted you personally. I totally understand that nobody is eager to drive through that traffic if one doesn't have to. I don't know how you do it, anyway. CA is far too much for me.

[Unregistered]

This happens a lot

I've seen this scenario several times with IRS imposing the $20/day penalty. In most cases, IRS will abate the penalty with a properly executed letter by an experienced accountant. Begging for forgiveness almost always works in this case if you have some reasonable cause.

[jainen]

reasonable cause applies

Thanks S T. This is new info for me.

Gabriele, you say, "reasonable cause applies." What would that be? Just relying on the accountant isn't enough. A second extension required IRS permission even if filed on time, so I think your request for abatement must explain why one would have been approved. I assume the return was actually filed within the few extra weeks that would have been covered by a second extension. It is also very important to explain that there has NEVER BEFORE been any irregularities with your tax returns, and that you have changed your procedures so that it will NEVER AGAIN happen.

[Jiggers]

990 Penalty

Who was responsible for the filing of the 990? Normally it is the taxpayer. However, if the CPA is the responsible party, then I would have the CPA follow-up with the abatement letter or have the CPA pay the penalty. If the CPA won't respond, change CPA's, and file a complaint with the state CPA board.

Hopefully you haven't paid the CPA his fee. If so, deduct it from his fee.

This ASSUMES that the CPA is the reason for the penalty.

If your taxpayer is just trying to make excuses....., well that is another issue.

[jimmcg]

A contrite letter citing a reasonable cause and petitioning for revocation of the penalty almost always works. The key is citing reasonable cause which indicates it was not intentional and beyond the ability of the taxpayer to comply. Good luck!

[jainen]

the goal

>>Who was responsible<<

Although reliance on professional advice is reasonable cause to abate certain kinds of penalties, I always think it is a weak excuse. Much better to identify external problems, such as need for third-party documents. Lacking that, being "contrite" or "begging for forgiveness," as other posts have said, is a pretty good strategy. The purpose of penalties is to encourage compliance, and taking responsibility and promising it was a one-time problem achieves the goal.

[S T]

Fax form

Gabriele, I tried to fax the form to you tonight, but I don't think it went through. Can you verify one way or the other.

Sandy

[Gretel]

Hi Sandy,

I didn't receive any fax from you. Could you e-mail? Fax# 775-205-2724 or taxes@midrivers.com.

Thanks,
Gabriele