A non-profit came to us one day because they received a bill from the IRS for over $120,000 plus penalties and interest for failure to file their tax returns. They were in a panic and had no idea what to do. This is where we stepped in.
The Issue
This non-profit thought they had been compliant. That is, until they realized their treasurer had been stealing money from them. Additionally, they had no idea that the treasurer hadn’t been filing the non-profit’s tax return for the past three years. Per the IRS, “the maximum penalty for any return is the lesser of $10,000 or 5 percent of the organization’s gross receipts for the year. For an organization that has gross receipts of over $1 million for the year, the penalty is $100 a day up to a maximum of $50,000.”
The Plan
First, we knew we had to work quickly. We had to get all their information into a QuickBooks file so that we could produce financial statements. Then we had to have a tax preparer utilize those statements to file the past due tax returns. Lastly, we had to put together a letter explaining the situation this non-profit was in and their plan to keep this from happening in the future.
The Work
We quickly started putting together their numbers for the years they had not been compliant. This was not an easy task as they did not have all the information readily available. They had to go to their bank and request paper copies of their prior year bank statements because they were no longer available to download online. They also had to speak to their bank and request copies of checks that were written because they had no idea what some of their expenses were. Once we had all the information together, we entered it into QuickBooks and produced financial statements.
The Wait
As soon as we had everything together and handed it off to the tax preparer, we put together the letter explaining the situation the non-profit was in and the systems they had in place to ensure future compliance. Our letter also outlined the financial situation this penalty was putting them in and asked that the penalties and interest be waived. We knew that the IRS might not be so lenient, but we had to ask as trying to pay this amount would surely put this non-profit out of business. Once our CPA put the tax returns together and sent them in with our letters, all we could do was wait.
The Outcome
Several weeks passed without any word from the IRS. Then, approximately two months later, our non-profit client called us. They were giddy with excitement! They had just received a letter from the IRS informing them that all fines, penalties, and interest had been dropped. The non-profit owed nothing to the IRS. They couldn’t thank us enough! So, if you find yourself in a situation with the IRS, give us a call. We would be more than happy to help you work your way through these issues and we have an amazing CPA that we partner with to take care of your tax issues.
