January 20, 2005 | Read Time: 2 minutes
The Internal Revenue Service announced last week that some large nonprofit organizations will be required to file their federal informational tax returns over the Internet starting next year.
In new regulations, the IRS said that for returns that cover the 2005 tax year and are due to be filed in 2006, charities with total assets of $100-million or more will have to submit their Forms 990 electronically.
For returns that cover the 2006 tax year and are due to be filed in 2007, charities with $10-million or more in total assets will be required to submit their forms electronically. In addition, private foundations and charitable trusts — regardless of the size of their assets — will have to electronically file their Forms 990-PF in 2007 for returns that cover the 2006 tax year.
The electronic-filing requirements apply only to organizations that file at least 250 returns of all kinds each year with the IRS, such as employment-tax forms. By 2007, the IRS expects that as many as 10,000 tax-exempt organizations will be required to comply with the electronic-filing rules.
The IRS said that it encourages all tax-exempt organizations to adopt electronic filing “as soon as feasible.” Electronic filing benefits the government and nonprofit organizations, the IRS said. Paper filings of Forms 990 and 990-PF currently have error rates of about 35 percent, the tax agency said, “due in roughly equal parts to IRS processing errors and taxpayer return-preparation mistakes.”
By contrast, the IRS said, “electronically filed returns have an error rate of less than 1 percent because these returns are subject to screening by the IRS prior to being accepted and are not required to be input manually by the IRS.”
The regulations were published in the January 12 edition of the Federal Register, and are available at http://www.gpoaccess.gov/fr/index.html. The IRS invited nonprofit groups to submit comments on the regulations, which are considered by the IRS to be temporary until the agency reviews comments and makes any adjustments.
