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Federal Regulations now require every American Legion Post to
file an annual information return with the IRS. Please use the information
included on this webpage to help determine which forms you must file with the
IRS.
The American Legion strongly recommends you consult a tax professional
before submitting your annual returns. Do not use this website as the sole basis
for determining which forms your Post is required to file.
Tax-Exempt Status of The American Legion
The American Legion is tax exempt under Section 501(c)(19) of the Internal
Revenue Code of 1954 as amended. Our Group Exemption Number (GEN) is 0925. Every
Post should have an Employer Identification Number (EIN) from the government.
You must have an EIN number to maintain a bank account and the number will be
used on your annual return.
New
Information Reporting Requirement
Previously, tax exempt organizations with gross receipts of $25,000 or less were
not required to submit informational returns. With the enactment of the Pension
Protection Act of 2006 (PPA), small tax-exempt organizations are now required to
submit a new annual notice, Form 990-N “Electronic Notice (e-Postcard) for
Tax-Exempt Organizations Not Required to File Form 900 or 990-EZ.”. The first
e-Postcards are due in calendar year 2008. The IRS intends to have an option
available for free electronic submission of the e-Postcard.
Any organization that fails to meet its annual reporting requirement for three
consecutive years automatically loses its tax-exempt status under the new law.
An organization that wants to regain its exempt status will then have to reapply
for recognition as a tax-exempt organization.
Note: Even though your Post may only be required to file the Form 990-N, The
American Legion strongly recommends each Post file a Form 990 or Form 990-EZ.
IRS Forms and Information
Form 990-N, “Electronic Notice (e-Postcard) for Tax-Exempt
Organizations Not Required to File Form 900 or 990-EZ”
Small tax-exempt organizations, whose gross receipts are normally $25,000 or
less, are not required to file Form 990 or Form 990-EZ. Beginning in 2008, small
tax-exempt organizations that previously were not required to file returns are
required to file an annual electronic notice, Form 990-N. This filing
requirement applies to tax periods beginning after December 31, 2006.
Note: Even though your Post may only be required to file the Form 990-N, The
American Legion strongly recommends each Post file a Form 990 or Form 990-EZ.
Form 990-EZ, “Short Form Return of Organization Exempt From Income
Tax” & Form 990, “Return of Organization Exempt From Income Tax
Tax-exempt organizations, other than private foundations, must file Form 990 or
Form 990-EZ. An organization may file Form 990-EZ, instead of Form 990, only if
(1) its gross receipts during the year were less than $100,000, and (2) its
total assets (line 25, Column (B) of Form 990-EZ) at the end of the year were
less than $250,000. If your organization fails to meet either of these
conditions, you cannot file Form 990-EZ. Instead you must file Form 990. Form
990 or Form 990-EZ must be filed by the 15th day of the 5th month after the end
of your organization's accounting period. The Form 990 and Form 990-EZ
instructions indicate the Service Center to which they must be sent.
Penalties for Late Filings
A tax-exempt organization that fails to file a required return is subject to a
penalty of $20 a day for each day the failure continues. The same penalty will
apply if the organization fails to give correct and complete information or
required information on its return. The maximum penalty is $10,000 or 5 percent
of the organization's gross receipts, whichever is less. The penalty increases
to $100 per day up to a maximum of $50,000 for organization whose gross receipts
exceed $1,000,000.
Incomplete Returns
The IRS treats an incomplete return the same as a return filed late - the
penalties are the same. For example, if an organization fails to attach Schedule
A or Schedule B to its annual return - one of the most common errors in filing
Forms 990 and 990-EZ - its return is considered incomplete and filing penalties
may apply.
Unrelated Business Income Tax (UBIT)
Even though an organization is recognized as tax exempt, it still may be liable
for tax on its unrelated business income. Unrelated business income is income
from a trade or business, regularly carried on, that is not substantially
related to the charitable, educational, or other purpose that is the basis of
the organization's exemption. The term “trade or business” includes any activity
carried on for the production of income whether from selling goods or performing
services. Unless the business activities, apart from the income generated,
contribute importantly to the accomplishment of the organization’s exempt
purposes, they are not substantially related and are subject to Unrelated
Business Income Tax.
If your Post operates a bar or dining facility or rents its facilities to
non-members, you may be subject to UBIT.
Form 990-T, “Exempt Organization Business Income Tax Return”
Even though an organization is recognized as tax exempt, it still may be liable
for tax on its unrelated business income. An exempt organization that has $1,000
or more gross income from an unrelated business must file Form 990-T. The
obligation to file Form 990-T is in addition to the obligation to file the
annual information return. Tax-exempt organizations must make estimated tax
payments if it expects its tax for the year to be $500 or more. The Form 990-T
of a tax-exempt organization must be filed by the 15th day of the 5th month
after the tax year ends. For additional information, see the Form 990-T
instructions or IRS Publication 598, Tax on Unrelated Business Income of Exempt
Organizations.
Payroll Taxes
Every employer, including a tax-exempt organization, who pays wages to employees
is responsible for withholding, depositing, paying, and reporting federal income
tax, social security taxes (FICA), and federal unemployment tax (FUTA) for such
wage payments, unless that employer is specifically excepted by statute from
such requirements or if the taxes are clearly inapplicable. For more
information, see IRS Publication 15, Circular E, Employer's Tax Guide; IRS
Publication 15-A, Employer's Supplemental Tax Guide; Form 940, Employer's Annual
Federal Unemployment (FUTA) Tax Return; and Form 941, Employer's Quarterly
Federal Tax Return.
Resources
IRS Website: www.irs.gov
IRS Publication 3386, “Veterans’ Organizations Tax Guide”
http://www.irs.gov/pub/irs-pdf/p3386.pdf
IRS Publication 557, “Tax Exempt Status For Your Organization”
http://www.irs.gov/pub/irs-pdf/p557.pdf
IRS Forms & Instructions
http://www.irs.gov/formspubs/index.html
Forms
Please consult your tax
professional or visit www.irs.gov to obtain
forms.
NOTE:
The American Legion strongly recommends you consult a tax professional before
submitting your annual returns. Do not use this letter as the sole basis for
determining which forms your Post is required to file.
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