The GuideStar Blog retired September 9, 2019. We invite you to visit its replacement, the Candid Blog. You’re also welcome to browse or search the GuideStar Blog archives. Onward!

GuideStar Blog

IRS Updates, September 2010: Automatic Revocations, Health Care Tax Credit, Flexible Spending Arrangements in 2011

Reprinted from IRS EO Update 2010-20, August 27, 2010, and IRS EO Update 2010-21, September 7, 2010

Do You Know a Small Organization at Risk of Losing Its Exempt Status

[The IRS needs] your help to prevent tax-exempt organizations in your community from losing their tax exemption. Tax-exempt organizations, except churches and church-related groups, that fail to file for three consecutive years automatically lose their tax-exempt status. The IRS is providing one-time relief to allow small tax-exempt organizations to come back into compliance by October 15, 2010, and retain their tax-exempt status even though they failed to file for three consecutive years. The IRS has published a list of over 300,000 organizations at risk of losing their exemption because the IRS has no record of their filing for 2007, 2008, or 2009.

If you are a volunteer, member or just a friend of an organization at risk of losing its exemption, please alert the organization and encourage it to go to IRS.gov and find out how the organization can come back into compliance today.

Source: EO Update, August 27, 2010

New FAQs for "At-Risk" Organizations

As described above, tax-exempt organizations that do not satisfy annual filing requirements for three consecutive years automatically lose their tax-exempt status. The IRS has issued FAQs about automatic revocation for failure to file a return or notice and FAQs about the one-time filing relief program for organizations at risk of losing their tax-exempt status. New questions and answers have been added to address questions involving terminated organizations, filing requirements of organizations included in group rulings, and organizations that believe they are exempt from filing as churches or church-related organizations.

Source: EO Update, August 27, 2010

IRS Releases Form to Help Small Employers Calculate New Health Care Tax Credit, Announces How Tax-Exempts Will Claim Refundable Credit

The IRS today [September 7, 2010] announced the release of a draft version of the Form 8941 that both small businesses and tax-exempt organizations will use to calculate the small business health care tax credit during the 2011 tax season. The credit is designed to encourage small employers to offer health insurance coverage or maintain the coverage they currently offer their employees.

While small businesses will include the amount of the credit as part of the general business credit on their tax returns, tax-exempt organizations eligible for the refundable credit will claim the credit on a revised Form 990-T. The revised Form 990-T will enable eligible tax-exempt organizations to claim the tax credit even though they owe no tax on unrelated business income.

Source: EO Update, September 7, 2010

IRS Issues Guidance Explaining 2011 Changes to Flexible Spending Arrangements

The Internal Revenue Service announced that it has issued guidance reflecting statutory changes regarding the use of certain tax-favored arrangements, such as flexible spending arrangements (FSAs), to pay for over-the-counter medicines and drugs.

The Affordable Care Act established a new uniform standard that applies to FSAs and health reimbursement arrangements (HRAs), effective January 1, 2011. Under the new standard, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. Certain expenses are exempted from this new requirement.

Employers, including tax-exempt employers, as well as employees should take these changes into account as they make health benefit decisions for 2011.

Source: EO Update, September 7, 2010

Reprinted from IRS EO Update 2010-20, August 27, 2010, and IRS EO Update 2010-21, September 7, 2010

Topics: Law and Regulations