What is the Penalty for Not Filing a 990-N?

Small nonprofits work hard to make an impact in the communities they serve. This means juggling a lot, from fundraising and administrative work to volunteer management and program development. 

With so much on your plate, filing your Form 990-N can easily fall to the back burner. But what’s the penalty for not filing a 990-N? Let’s take a closer look. 

What is the Form 990-N?

Form 990-N, also called the e-Postcard, is a form that tax-exempt organizations must file to report their income to the IRS. It’s the simplest version of the Form 990, made for small tax-exempt groups that have less than $50,000 in gross annual receipts.

Even if your organization breaks even (meaning it spends all the money it brings in), you’re still required to file a 990-N. There’s no paper version of this form; it can only be filed online. 

What happens if I don’t file the 990-N?

Nonprofit groups with $50,000 or less in gross annual receipts must file the 990-N every year. The deadline for filing is the 15th day of the 5th month after the close of your organization’s tax year. For example, if your tax year ends on June 30, the form must be filed by November 15 of that same year.

So, what happens if you don’t file your 990-N on time? 

The truth is, not much – at least not right away. If you miss the deadline, you can expect a notice from the IRS reminding you to file. But you won’t face any major penalties right away. 

But here’s the kicker: if you fail to file your 990-N for three consecutive years, your group’s tax exempt status will automatically be revoked. This can seriously impact your ability to carry out your organization’s mission. Here’s a closer look at how: 

You’ll be added to a public list

Your organization will be added to a list of groups whose tax-exempt status has been revoked for failing to file a 990-N for three years in a row. This list is publicly available and easy for anyone to find, including potential donors. 

You’ll no longer be exempt from federal income taxes

This means your organization may have to file the same tax returns required of for-profit businesses. You may also be on the hook for paying any applicable federal income taxes. 

You won’t be eligible to receive tax-deductible contributions

Donors will no longer be able to make tax-deductible contributions to your organization. This can discourage giving and negatively impact your fundraising efforts.

You may lose access to grants 

Many nonprofit organizations rely on grants to fund their work. But many grant-making organizations require proof of compliance with IRS rules. If your organization can’t provide that proof, you may miss the boat on important funding opportunities. 

You’ll lose credibility

It’s easy for donors and partners to look up an organization’s status online. Losing your tax-exempt status can raise red flags and create doubts about your organization’s reliability and governance. 

You may face additional state or local consequences

The exact impacts vary by state, but some states have their own filing requirements or penalties tied to federal compliance.

It’s not worth the risk

The consequences of not filing your 990-N aren’t immediate. But in the long run, not filing can seriously impact your ability to raise funds and carry out your mission. 

Regaining your tax-exempt status isn’t as simple as flipping a switch. If your tax-exempt status was revoked, you need to apply for reinstatement, which can be a time-consuming, tedious process. 

It’s just not worth the risk!

File your 990-N the easy way with 501c3 Center

The good news is that filing your 990-N is relatively straightforward. With everything else you’re juggling, it’s nice to know that staying compliant and in good standing with the IRS doesn’t have to be complicated.

That said, anything related to the IRS and taxes can feel daunting, especially for busy nonprofits. 501c3 Center is here to help. We make it quick and easy to complete your 990-N so you can focus more on your mission, and less on the paperwork. Find out more and get started today.