Craft a Past Due Invoice Letter for NPOs with Ease

Past due invoice letter for NPOs

some days there are pieces of mail you just don't want to see bills late notices maybe a recall on that car you just bought not fun right but if you operate a 501c3 nonprofit one piece of mail you really don't want to see in your mailbox is irs notice cp 120a what's that it's your notice of revocation of tax-exempt status now what do you do [Music] hi i'm greg mcrae founder and ceo of foundation group and welcome back to our 501c3 university channel where we endeavor to make non-profit compliance understandable so you got this nasty gram from the irs telling you that you lost your 501c3 status bad day for sure and it's not really comforting to know that you're not alone it happens to thousands of non-profits every year but now you have to deal with this now i'm gonna outline five things you must do if your nonprofit loses its 501c3 status but before i do let me tell you how this happened to you in the first place since 2011 the irs has been revoking the 501c3 status of any non-profit that fails to file form 990 for three consecutive years now this termination of status was the result of legislation passed in 2006 called the pitch and protection act that brought a ton of new federal compliance rules for nonprofits the most relevant to our conversation being the requirement of all 501c nonprofits to file the appropriate version of form 990 every single year each month the irs updates its naughty list searchable at irs.gov eo of all the organizations that most recently had their status revoked notice cp 128 well that's this little guy right here the letter that informs you that this has happened to you and to make bad news worse you will not get a warning from the irs that this is coming nor is the decision appealable miss three consecutive years lose your tax exemption no exceptions no excuses so is there any good news in here well thankfully there is the best news of all is that it is possible to get your 501c3 status restored but hang on there's a process here and it's critical that you fully understand the ramifications of auto revocation and the correct way to get back what you lost it all starts with these five things number one stop soliciting donations like stop it now today your non-profit is no longer a tax-exempt charity you don't have 501c3 status anymore and you're probably already ahead of me on this donations if you get them are not tax deductible to the donor as of the effective date posted on your revocation notice let's just be brutally honest here if you continue to solicit donations you are either explicitly or implicitly communicating that you are still a 501c3 if there's even a chance that your donors could believe your nonprofit still has tax exemption you could be guilty of fraud violating any number of state and federal laws now fortunately for your donors gifts they made after your revocation date that were made in good faith meaning they reasonably believed that your nonprofit was still a 501c3 well they'll most likely still be tax deductible on their tax return but if that donor is audited the lack of a contemporaneous donation receipt may undercut that number two communicate your new reality to your regular donors yeah this one kind of gives you heartburn doesn't it no one really wants to admit to their donors that they screwed up and failed to be irs compliant not once but for three straight years it's embarrassing right i get it i wouldn't want to be in your shoes either but failure to communicate the reality of your tax-exempt status to those who are frequent or systematic givers it's just another version of fraudulent representation do the right thing and inform your regular donors number three do not reincorporate crazy as it might seem we see this all the time and it comes from people not really understanding the difference between their non-profit as a corporate entity versus its irs tax status the irs has revoked your 501c3 status not torpedoed your entire organization assuming you've been filing your state corporate report on time your nonprofit should still legally exist as a nonprofit corporation it's just that you no longer have federal tax exemption as a 501c3 so if you receive a letter of revocation from the irs don't panic your non-profit still exists so do not file new articles of incorporation make sure your corporate status is still active at the state level then move on to number four number four apply to the irs for 501c3 status reinstatement once your status has been revoked you have to apply to the irs to get it back simple as that you'll use form 1023 like you did the first time and you'll have to indicate that this is a reinstatement application be prepared to provide the same level of detail as before except you'll be looking backward instead of projecting proposed programs also if one of the three years of missing form 990s was more than a form 990 n you're going to need to prepare those back returns for each missed year are we having fun yet it's likely that the irs will have follow-up questions for you once they receive your application for reinstatement but assuming your program is still 501c3 qualifying you should be able to have your tax-exempt status restored maybe even retroactive and finally number five don't ever let it happen again hopefully your nonprofit never loses its tax-exempt status but if it does learn the lesson maintaining proper compliance is not a best practice recommendation it's a legal necessity failure to file form 990 not only jeopardizes your tax-exempt status but it also telegraphs a disregard for transparency and accountability and frankly that's not a good look for any charitable organization if you are in this predicament do not beat yourself up so many charities are volunteer driven and the rules can be overwhelming it happens but like i said you can get your status back foundation group works with dozens of reinstatement cases every single year if you need help reach out to us we can help you with both the form 1023 the back form 990 filings we can even help you get current on your state filings you don't have to go it alone there's a link in the description below for details on our reinstatement services well that's it for this installment if you liked this video help us out by clicking the like button be sure to subscribe if you haven't already we've got great content coming at you every single week thanks for watching now go serve your community [Music] you