Some Tax-Exempt Organizations Are Receiving Erroneous Penalty Notices; Relief Available

Practitioners are reporting that some tax-exempt organizations have received penalty notices from the IRS for late filing of Forms 990, 990-EZ, 990-PF, and 1120-POL, even though they received an automatic extension and filed during March, as instructed by the IRS.

The IRS’s e-filing computer system was not available for filing Forms 990, 990-EZ, 990-PF, and 1120-POL from Jan. 1, 2012, through Feb. 29, 2012, so that the IRS could “facilitate systems and programming changes.” Because the system was being taken down, the IRS extended the filing deadline for Form 990 until March 30, 2012, for many tax-exempt organizations with a filing due date during the first two months of 2012 (Notice 2012-4). Organizations affected by the extension normally would have had a filing deadline of Jan. 17 or Feb. 15, 2012. The extension applied to these forms whether or not the organizations are required to file electronically.

Affected organizations could file electronically between March 1 and March 30, 2012; however, some that did file during March have received penalty notices (Notice CP 141L) from the IRS. Notice CP 141L is sent to taxpayers “who, according to [IRS] records, filed a complete return late” (Internal Revenue Manual §21.3.8.10.2.4).

The IRS has advised practitioners in an email that, if an organization had a due date of Jan. 17 or Feb. 15, 2012, and filed a Form 990, 990-EZ, 990-PF, or 1120-POL in March and received Notice CP 141L in error, they should take the following steps to request penalty abatement:

1. Call the number listed at the top of the notice: 1-877-829-5500; and 
2. Request that the IRS abate the penalty in accordance with Notice 2012-4.