Be Aware of Issues when E-Filing

For tax-exempt organizations that are currently working on filing their annual Forms 990, new rules surrounding mandatory electronic filing (e-filing) are causing quite a headache for tax professionals.

Originally enacted on July 1, 2019, the Taxpayer First Act required all tax-exempt organizations to electronically file their annual returns. Though electronic filing for exempt organization returns was available before the passage of this Act, it was mandatory only for select organizations. And several forms and scenarios were unavailable for e-filing all together, such as the Form 990-T, Form 4720, initial filers, or organizations that had a name change or year-end change in any given year.

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Electronic Filing Required for Applications for Exemption, Form 1023

At long last, the process for applying for exemption has entered the twenty-first century. Currently the Form 1023, the application for exemption under Internal Revenue Code Section 501(c)(3), may be submitted electronically. However, after April 30, 2020, the IRS will only accept electronic filing of the form and online payment of the user fee. Paper copies of Form 1023 will no longer be accepted.

The IRS expects the change to improve processing time, similar to how Form 1023-EZ electronic submissions did when that form first went on-line in 2014.

“Filing electronically reduces errors, and we believe this will help provide a smoother application process for those seeking tax exemption,”

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News Alert: Mandatory Electronic Filing for Exempt Organizations

On July 1, 2019, the Taxpayer First Act (TFA) was signed into law. The significance of this law centers on administrative procedures the IRS must enact in order to become a more taxpayer-friendly agency. The TFA sets new mandates to enhance the taxpayer experience through modernization, more efficient tax administration, increased cybersecurity, and stronger identity protection. Focus has now shifted toward customer service priorities.

As part of the modernization efforts, the platforms available for filing returns have changed. Exempt organizations are now required to file forms electronically for tax years beginning after July 1, 2019. For those organizations that previously filed paper forms,

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