Introduction: Don’t Panic—But Don’t Ignore It, Either
Getting a letter from the IRS isn’t anyone’s idea of a good day, especially when it includes a penalty for filing your Form 990 late. But if your nonprofit has received a notice like this, you’re not alone. Late filing penalties are more common than most organizations realize, and in many cases, they can be waived or reduced.
This guide walks through what to do next so you can respond with clarity and increase your chances of having the penalty removed.
1. Review the Notice Carefully
Start by reading the notice thoroughly. Look for:
- The tax year the notice refers to
- The filing deadline vs. the date the return was received
- The type of return (e.g., Form 990, 990-EZ)
- The penalty amount and how it was calculated
2. Check Your Filing Records
Gather documentation that supports your filing timeline:
- A copy of the Form 990 that was filed
- E-filing confirmation or mailing receipt
- Proof of any extension filed (Form 8868)
- Documentation showing when the return was signed and submitted
Even if the return was late, having this information helps you build a strong case if you plan to request penalty relief.
3. Understand How Penalties Are Calculated
Late filing penalties for Form 990 are based on your gross receipts and how many days the return is overdue.
- Smaller organizations (under $1M in gross receipts): $20 per day, up to a maximum
- Larger organizations (over $1M in gross receipts): $105 per day, up to $56,000
- The penalty continues to accrue until the IRS receives a complete return
4. Consider a Penalty Abatement Request—Before You Pay
If your organization filed late, you can often request penalty relief, and it’s typically better to do so before submitting payment.
You may qualify for relief if:
- This is your first late filing
- There was reasonable cause, such as:
- A leadership transition
- Unexpected staff illness
- Filing delays due to mailing issues
- A miscommunication with your accountant or preparer
To request relief:
- File Form 843: Claim for Refund and Request for Abatement
- Include a written explanation of why the return was filed late
- Attach supporting documentation that helps explain the situation
📌 If you haven’t paid the penalty yet, it’s wise to request relief first. If approved, the IRS will waive the penalty. If you’ve already paid, you can still request a refund by filing Form 843, but proactive requests are often more straightforward.
5. Document Your Response and Follow Up
Once your request is submitted:
- Keep a copy of the Form 843 and your supporting documentation
- Watch your mail for any follow-up letters from the IRS
- Be patient—responses can take several weeks or more
If you haven’t heard back within 8–12 weeks, consider following up by phone with the IRS Exempt Organizations unit.
How a Bookkeeper Can Help
A bookkeeper who understands nonprofit compliance can help you avoid penalties in the first place and support you in responding to IRS notices when needed.
They can:
- Track filing deadlines and confirm that extensions (if needed) are submitted
- Keep digital records of filing confirmations and supporting documentation
- Help pull together financial records if you need to explain a delay
- Coordinate with your tax preparer to ensure future filings stay on track
📌 Prevention is always less costly than correction—and good bookkeeping makes it easier to respond quickly and confidently if issues arise.
Conclusion: Mistakes Happen. What You Do Next Matters.
A late filing penalty from the IRS isn’t the end of the world, but it is something that needs to be addressed. With clear documentation, a timely response, and the right support, your organization can often resolve the issue without lasting financial impact.
📌 Need help staying ahead of deadlines and maintaining audit-ready books? Stainless Book supports nonprofits with bookkeeping, compliance tracking, and preparation for Form 990. Book a free consultation today.
