On Fri, Mar 25, 2011 at 2:30 PM, William L. Thomson Jr.
> The IRS is slow, but you can prod them, and an experienced CPA or
> otherwise in this matter, should be able to deal with most things
> relatively quickly. Though most anything dealing with the government is
> slow. But the IRS really is not bad, if you do things correctly.
So, I would definitely consult with professionals before doing
anything, but from the little reading I've been able to do so far it
seems like organizations can go ahead and start filing taxes like they
are exempt before they get official recognition as such.
Now, I'm sure that makes you subject to penalties/etc if it turns out
you aren't exempt. However, I doubt it costs a dime more than what
you'd be subject to for not filing taxes at all once they catch up
with us (and unless we're raking in a lot of cash after expenses that
may not actually be much - it looks to me that unless criminal charges
are filed the liability is whatever we'd pay in taxes anyway, interest
at a rate that isn't that bad, and a penalty of up to 25% more - so
you basically pay what you should have paid all along plus enough of a
fine to make it not worth your while to delay). As others have said I
doubt criminal charges are likely unless somebody is pocketing funds
or using the organization to launder money or something - if you pay
your penalties the IRS is probably happy to cash the check and wait
for your next return.
The terminology used in the IRS publications/etc is "recognition of
tax-exempt status." The logic is that tax-exempt organizations are
tax-exempt by virtue of law, and not because they are certified as
such (tax deductions for contributors are probably a different story).
So, basically you're just asking the IRS to acknowledge what is
That said, I have no doubts that issues from the past will make
getting this recognition more difficult. Even so, the sooner we get
squeaky-clean with the paperwork the sooner we can move back in that
direction. I'm sure the IRS looks differently at an application by an
organization that has had the forms in on time for 5 years in a row
than one that is struggling to show compliance, regardless of the
history of either.
I've been slowly working my way through the IRS website as their
publications aren't actually all that bad and of course they are
official. If somebody is aware of a good place to find trustworthy
tips/etc for NFPs/etc let me know.