Small nonprofits now must file with IRS; many at risk of missing deadline tomorrow

Small non-profit agencies may lose their tax-exempt status Monday if they haven't adhered to new Internal Revenue Service regulations that were passed in 2007 and go into effect next week. "In years past a nonprofit organization with gross receipts under $25,000 had only to prove to the federal government upon startup that it was what it claimed to be, intent on doing what it said it would do," Sehlia Hagar of the Walla Walla Union-Bulletin reports. "That's no longer the case. Now every nonprofit agency, regardless of monetary size, must file a special tax filing form called a 990. That lets the IRS know what's going on with staffing, mission and money."

Previously these non-profits never had to check back in with the government after their initial approval, so no one really knows how many groups are affected by the new regulation. The National Center for Charitable Statistics reports there are 7,663 organizations in Washington state alone at risk of losing tax-exempt status if they miss the Saturday deadline, but many are relatively unknown and several may not even be operating, Hagar writes. "Basically, the feds are trying to shrink the size of the database, the master file," Lawson Knight, executive director of Blue Mountain Community Foundation, told Hagar. "They never had a way to track the smaller ones before, this is a cleanup. It's like all of these accounts sitting on the books and not sure of some of then are still alive. So the government will send a 'ping' and see if they ping back."

If still-active organizations miss the deadline they could face serious consequences. "Losing tax-exempt status means starting over from scratch," Hagar writes. If an organization's tax-exempt status lapses it is so longer able to accept charitable donations. "This is going to wake up organizations that thought they could just continue doing things as they've always done them," Sandra Gill of Spokane-based Northwest Nonprofit Resources told Hagar. Churches are exempt from the new regulation, but local groups like youth baseball organizations and 4-H clubs are affected. (Read more)