Where is my application for exemption?

IRS processing delays leave nonprofits waiting.

by Bethany Peak

iStock_000016157281XSmall (2)Is your organization preparing to file an application for recognition of federal tax exempt status? Those who have bravely gone before you can tell you to expect to wait … and wait … and wait. On May 31, 2013, the IRS began processing applications received in April 2012, and their website indicates they are still processing applications received then. This 18-month delay and counting applies not only to first time applicants, but also to applications for reinstatement (filed after an organization’s tax-exempt status has been involuntarily revoked).

The delay may be attributed to a number of factors, including the US government budget sequestration, which resulted in IRS furloughs cutting the number of employees and their hours, as well as budget cuts to training programs, both necessary to ensure enough skilled EO Specialists available to review applications. Now, the government shutdown that began at 12:00 am on October 1, 2013 promises to exacerbate the situation, already complicated by the IRS’s internal struggles in the wake of the recent revelations of the EO Division targeting certain 501(c)(4) applications for extra scrutiny.

So, how can we speed up the process? While we cannot change the initial wait time, we can ensure the application is complete and easy to review once it finally gets into an EO Specialist’s hands. Ask yourself:

  1. Did you completely and accurately answer all application questions?
  2. Did you refrain from answering questions not related to your type of organization?
  3. Did you provide all required supporting documentation, including your organizing document and all amendments, bylaws, policies and procedures, compensation information, financial information, and any required Schedules?
  4. Did you include the correct user fee?

If you already submitted your application and answered no to any of these questions, do not lose hope. You can supplement your application with additional information once the IRS begins its review.

While you await a response from the IRS, rest assured that you may continue to fully operate as a 501(c)(3) tax-exempt organization. Carry on your charitable activities and programs, raise awareness, and accept tax-deductible donations. Once you receive a determination letter from the IRS, whenever that may be, it will be effective as of the date the IRS received your application, so long as your application was timely filed and your status as an exempt organizations is ultimately recognized. In order to ensure you meet the qualifications for recognition as an exempt organization, we recommend you contact a qualified attorney prior to filing your application for exemption.

If you would like more information regarding the initial preparation of an application for exemption or if you would like assistance responding to IRS questions or tracking your application’s progress with the IRS, feel free to contact us on our website or at info@baalegal.combaalegal.com.

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