K. Failure to File Penalties
Against the Organization
Under section 6652(c)(1)(A), a penalty of $20 a day, not to exceed the smaller of $10,000 or 5% of the gross receipts of the organization for the year, may be charged when a return is filed late, unless the organization can show that the late filing was due to reasonable cause. Organizations with annual gross receipts exceeding $1 million are subject to a penalty of $100 for each day the failure continues (with a maximum penalty with respect to any one return of $50,000). The penalty begins on the due date for filing the Form 990 or Form 990-EZ.
Use of a paid preparer does not relieve the organization of its responsibility to file a complete and accurate return.
Incomplete return. The penalty may also be charged if the organization files an incomplete return. To avoid having to supply missing information later, be sure to complete all applicable line items; answer “Yes,” “No,” or “N/A” (not applicable) to each question on the return; make an entry (including a zero when appropriate) on all total lines; and enter “None” or “N/A” if an entire part does not apply.
Incorrect information. This penalty may be imposed if the organization's return contains incorrect information. For example, an organization that reports contributions net of related fundraising expenses may be subject to this penalty.
Against Responsible Person(s)
If the organization does not file a complete return or does not furnish correct information, the IRS will send the organization a letter that includes a fixed time to fulfill these requirements. After that period expires, the person failing to comply will be charged a penalty of $10 a day. The maximum penalty on all persons for failures with respect to any one return shall not exceed $5,000 (section 6652(c)(1)(B)(ii)).
Any person who does not comply with the public inspection requirements, as discussed in General Instruction M, will be assessed a penalty of $20 for each day that inspection was not permitted, up to a maximum of $10,000 for each return. The penalties for failure to comply with the public inspection requirements for applications is the same as those for annual returns, except that the $10,000 limitation does not apply (sections 6652(c)(1)(C) and (D)). Any person who willfully fails to comply with the public inspection requirements for annual returns or exemption applications will be subject to an additional penalty of $5,000 (section 6685).
There are also penalties (fines and imprisonment) for willfully not filing returns and for filing fraudulent returns and statements with the IRS (sections 7203, 7206, and 7207). States may impose additional penalties for failure to meet their separate filing requirements. See also the discussion of the Trust Fund Recovery Penalty, under General Instruction D.
L. Contributions