Thinking of closing out 2011 with a charitable donation to a tax-exempt non-profit?
You might want to check out a website the IRS has posted in the aftermath of 275,000 non-profits nationwide recently losing their tax-exempt status.
The posting over the past few months is the result of action by Congress four years ago requiring all non-profits to file an annual report.
Those who don't file a report for three consecutive years automatically lose their tax-exempt status.
Non-profits with receipts of $25,000 or more each year have long been required to fill out a 990 form to maintain the tax-exempt status of the funds they receive.
The changes in 2007, though, apply to all non-profits - no matter how small their income is each year.
Smaller non-profits previously had no annual filing requirements with the IRS.
The VFW post in Sunnyside is one of the local groups caught in the cross-hairs of the IRS's new stance.
"If you don't file your 990's every year, then you're in deep trouble," says Bill Ingram, commander of the Sunnyside VFW.
While his post is up to date on that requirement, a non-profit group the local VFW started for a Lower Valley honor guard met a different fate.
Lee Martin of Grandview is a CPA who helps out the VFW post, and he said someone in the Sunnyside post established a small non-profit for the honor guard, but didn't follow through with the annual IRS paperwork. As a result, he says the honor guard no longer has tax exempt status.
The good news, of course, is that the Sunnyside VFW continues to be a tax-exempt non-profit that can receive funds for the honor guard.
Martin handles the 990 form filing for the VFW post here, which is required because the post has annual receipts that are more than $25,000.
He says the 990 can be a daunting form to complete.
"It's just a really long form, 15 or 16 pages," Martin says. "I would hate to do it without a tax program in my computer. Don't try to do it by hand because you're probably going to get it wrong."
As for the annual form required for smaller non-profits, the paperwork is much simpler.
Nate Bridges of Sunnyside is a CPA who has helped non-profit Sunnyside's Promise maintain its tax-exempt status with the IRS.
"It's very easy to do," he says of filing the tax-exempt form that's been required since 2007. "It's not a bad thing, the IRS requires minimal information. They just want to make sure you still exist."
To be sure, there are several local non-profits that lost their tax-exempt status because they likely no longer exist, such as a Jaycees (junior chamber) group that was registered in Sunnyside at one time.
But for non-profits who are active, maintaining a tax-exempt status means keeping in touch with the IRS every year.
Bridges said a point of confusion for some smaller non-profits is an annual fee of $10 they file with the state of Washington.
Filing with the state, he cautions, doesn't mean you're up to date with the IRS.
"That has nothing to do with the IRS," he says. "They (state and IRS offices) don't talk to each other."
The impact of losing tax-exempt status, Bridges notes, hurts the non-profit, as well as its supporters.
"Should you get audited, you won't get a deduction if you gave to a non-profit that lost its tax-exempt status," he says.
A searchable database of non-profits in Washington state who lost their tax-exempt status is available at irs.gov/pub/irs-tege/wa.pdf.