Some organizations will be unable to electronically file two key tax returns due between Jan. 15 and March 15 and might need to request a filing extension from the Internal Revenue Service (IRS).
Currently, forms with due dates between Jan. 15 and March 15 cannot be filed. Only taxpayers with due dates on or after April 15 can file these forms on time.
Tax-exempt and political organizations use Form 1120-POL to report their taxable income and income tax liabilities.
The IRS said that, based on previous filing data, around 2,000 990-T and 1120-POL forms are typically filed between Jan. 15 and March 15. Consequently, the delay is expected to affect only a small number of taxpayers.
An organization with a Form 990-T due between Jan. 15 and March 15 must request a six-month filing extension by the due date of the return. This can be done by submitting Form 8868.
“Any balance due must be submitted with Form 8868 to avoid interest and penalties. Beginning March 17, 2024, organizations will be able to timely e-file Form 990-T by the extended due date,” the IRS said.
“If an affected organization doesn’t timely submit an extension, or if the extended due date falls within the period from Jan. 15, 2024, to March 15, 2024, and the organization consequently doesn’t timely e-file its Form 990-T, it should include with its late e-filed Form 990-T a request that any penalties for late filing not be imposed due to reasonable cause.
“The reasonable cause request should reference that e‑filing was not available as of the due date of the return.”
Organizations filing Form 1120-POL due between Jan. 15, 2024, and March 15, 2024, can opt to file on paper instead of doing it electronically. However, if the organization wishes to e-file, they can request a six-month extension.
Only a “handful” of such groups usually e-file during the affected period, the IRS said. Any tax balance due must be paid in full when filing the extension form to avoid penalties and interests.
Interest and Penalties
According to the IRS, any entity exempt under section 501(a), section 529(a), or section 529A(a) that makes a gross income of $1,000 or more regularly from unrelated trade or business must file Form 990-T.Organizations that do not file or pay their returns on time would be subject to interest and penalties. The interest will be charged on taxes that are unpaid by the original due date of the return even if the organization has requested an extension.
“Interest is also charged on penalties imposed for failure to file, negligence, fraud, substantial valuation misstatements, and substantial understatements of tax from the due date (including extensions) to the date of payment.”
Late payment penalties can be imposed based on whether the tax filing or payment is delayed.
If an organization fails to file the returns on the due date, they would be subject to a penalty of 5 percent of the unpaid tax per month for every month the return is late. A maximum of 25 percent in penalties would be charged.
“The minimum penalty for a return that is more than 60 days late is the smaller of the tax due or $450. The penalty won’t be imposed if the organization can show that the failure to file on time was due to reasonable cause,” the IRS states.
“If you receive a notice about a penalty after you file this return, reply to the notice with an explanation and we will determine if you meet reasonable cause criteria. Don’t include an explanation when you file your return. “
In case the organization is late in paying taxes, a penalty of 0.5 percent of unpaid taxes would be charged, with the maximum penalty set at 25 percent. This penalty may also be waived by the IRS if the taxpayer can prove reasonable cause for being late.
The IRS may also impose penalties on organizations that do not make estimated tax payments by the due date. Penalties can also be charged for negligence, understating transactions, substantial understatement of taxes, and fraud.
