What is the penalty for failure to file Tax-Exempt Organization tax return?
The penalties of failure to file a tax exempt organization's required income tax return can be quite substantial. In fact, the IRS tax code states that a "tax-exempt organization that fails to file a required return is subject to a penalty of $20 a day for each day the failure continues".
Additionally, the IRS has specified that "the same penalty will apply if the organization fails to give correct and complete information or required information on its return".
The IRS has however, established a maximum amount of penalty for any one tax return. This amount is "the lesser of $10,000 or 5 percent of the organization's gross receipts for the year. If the organization has gross receipts in excess of $1,000,000, the penalties are increased to $100 per day with a maximum penalty of $50,000".
Thus, it is of paramount importance that a competent and experienced CPA specializing in Tax-Exempt Organizations returns, be hired to prepare these returns, due to substantial inaccuracy penalties. The Tax-Exempt tax returns should also be filed on a timely basis to avoid potential late filing penalties.