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990 late filing penalty notice - how to abate?

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    #1

    990 late filing penalty notice - how to abate?

    I don't do much work with not for profit but I do have a couple of 990s each year. I had a 990 due in November 2021 and was able to extend to May 2022. When I tried to e-file, I could not get the e-file to go through. It took several weeks but I finally figured out that I needed a different 501c extension than the one I was using. In past years I paper-filed as 501c4 with no issues. I had to e-file this time, as 990s are no longer allowed to be paper-filed, and it would not go through until I learned that I had to have it as a 501c19. At that point the e-file was accepted, but after May 15.

    The problem is that the accepted tax return was several weeks late. I'm not sure I can convince IRS that 501c19 issue is reasonable cause for late filing. I think I need more ammunition for my abatement request letter.

    Looking at a $5k CP141l notice that I really need to go away. Any thoughts or advice appreciated.
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    #2
    Contact your E&O insurance carrier.

    "convince IRS that 501c19 issue is reasonable cause for late filing"

    It really boils down to inexperienced preparer (by your own admission), doesn't it? There are certain returns I don't do, such as estates and non-profits, because it's not worth it to me to invest the time learning all the ins and outs that a paying client expects me to know. I won't even do a 1041 return unless it is very simple.
    "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

    Comment

      #3
      "...be a hardship to this small, local not for profit and harm it's ability to fulfill its mission to our community..." Is something like that true? Tug on the heartstrings. If it gets rejected, send it again in hopes of a better IRSer.

      Comment

        #4
        I don't know how a 501(c))4) got confused with a 501(c)(19), but I suggest that you also inform the State Attorney General's Office if such a comparable form is due
        to protect the organization with the state agency.
        Uncle Sam, CPA, EA. ARA, NTPI Fellow

        Comment

          #5
          An FTA (first time abatement) would probably work, if this is the first late return.

          Comment

            #6
            "An FTA (first time abatement) would probably work, if this is the first late return."

            I couldn't find anything at the IRS web site that was pertinent (except for some obtuse IRC references), but the following article states that FTA is not available for late filing penalties for tax-exempt organizations.

            Does the IRS’ First Time Abatement Rule Apply to Tax-Exempt Organizations?
            https://freemanlaw.com/does-the-irs-first-time-abatement-rule-apply-to-tax-exempt-organizations/
            For tax-exempt organizations, the annual return is IRS Form 990, 990-EZ, or 990-N. If the organization fails to file a timely and accurate return with the IRS, the IRS is permitted to impose a civil penalty against the organization under Section 6652(c) of the Code.


            As for reasonable cause, I don't see where "harm from paying the penalty" is any kind of defense, as was suggested above. The whole point of penalties is to cause "harm" and deter the behavior in the future.

            It seems pretty clear this is nothing but preparer error. Why wouldn't the preparer just take responsibility for it? (which is why we carry E&O insurance). But see the following article for more technical considerations.

            Form 990: Late filing penalty abatement
            https://www.journalofaccountancy.com/issues/2014/nov/late-filing-form-990.html
            Several types of relief may be available to not-for-profit organizations that incur penalties for violating complex filing requirements.
            "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

            Comment

              #7
              Originally posted by Rapid Robert View Post
              "An FTA (first time abatement) would probably work, if this is the first late return."

              I couldn't find anything at the IRS web site that was pertinent (except for some obtuse IRC references), but the following article states that FTA is not available for late filing penalties for tax-exempt organizations.

              Does the IRS’ First Time Abatement Rule Apply to Tax-Exempt Organizations?
              https://freemanlaw.com/does-the-irs-first-time-abatement-rule-apply-to-tax-exempt-organizations/
              For tax-exempt organizations, the annual return is IRS Form 990, 990-EZ, or 990-N. If the organization fails to file a timely and accurate return with the IRS, the IRS is permitted to impose a civil penalty against the organization under Section 6652(c) of the Code.


              As for reasonable cause, I don't see where "harm from paying the penalty" is any kind of defense, as was suggested above. The whole point of penalties is to cause "harm" and deter the behavior in the future.

              It seems pretty clear this is nothing but preparer error. Why wouldn't the preparer just take responsibility for it? (which is why we carry E&O insurance). But see the following article for more technical considerations.

              https://www.journalofaccountancy.com...-form-990.html
              FWIW I have had the penalty abatement work for a non for profit for a death of prior accountant.

              Chris

              Comment

                #8
                "had the penalty abatement work for a non for profit for a death of prior accountant."

                That sounds like reasonable cause, which is discussed in detail in the link I posted. If it was FTA, you wouldn't have had to have any reason.
                "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

                Comment

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