990 Tax Information
IRS “Responsible Party” Reporting Requirement – IMPORTANT!
Whenever there is a change of address or change in the person responsible for completing the Unit annual filing (IRS Form 990), the new person must file a IRS Form 8822-B. This is similar to a “Change of Address” form. What the IRS wants to know is the NAME of the “RESPONSIBLE PARTY.” A Unit needs to file within 60 days of whenever your Responsible Party changes.
The form is available on-line.
Tax Exempt Status of The American Legion Auxiliary
The American Legion Auxiliary is tax exempt under Section 501(c)(19) of the Internal Revenue Code of 1954 as amended. Our Group Exemption Number (GEN) is 0964.
Employer Identification Number (EIN)
Every Unit should have an Employer Identification Number (EIN) from the IRS. It does not matter if the Unit has no employees. Federal Tax Regulations require that every organization required to file an Annual Information Return (Form 990) is required to have an EIN.
Annual Filing Requirement
Federal Regulations now require every American Legion Auxiliary Unit to file an annual information return with the IRS.
Before the 2007 tax year, Units 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), Units are now required to submit an annual return.
For the 2007-2009 tax years, Units with gross receipts normally less than $25,000 could file a Form 990-N “Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 900 or 990-EZ.”. The first e-Postcards were due in calendar year 2008. The IRS offers free electronic submission of the e-Postcard.
Beginning with the 2010 tax year, Units with gross receipts normally less than $50,000 can now use the Form 990-N.
Units with gross receipts less than $200,000 and total assets less than $500,000 can use Form 990-EZ or Form 990.
If gross receipts are greater than $200,000 or total assets are greater than $500,000, the Unit must use the Form 990.
If the Unit is subject to Unrelated Business Income Tax (UBIT), the tax exempt organization must also submit the Form 900-T and pay the appropriate taxes. See section later in this handout on UBIT.
IRS regulations change frequently. The American Legion Auxiliary strongly recommends you consult a tax professional before submitting your annual returns. Do not use the information provided here as the sole basis for determining which forms your Unit is required to file.
Form 990-N, 990-EZ, and 990 must be filed by the 15th day of the 5th month after the end of the Unit's annual accounting period.
Penalties for Late Filings
If a Unit files its Form 990 after the due date (including any extensions), and the Unit doesn’t provide reasonable cause for filing late, the Internal Revenue Service will impose a penalty of $20 per day for each day the return is late. The maximum penalty is $10,000, or 5 percent of the Unit’s gross receipts, whichever is less. The penalty increases to $100 per day, up to a maximum of $50,000, for a Post whose gross receipts exceed $1,000,000.
For Units required only to complete the e-Postcard (Form 990-N), if the Unit does not file its e-Postcard on time, the IRS will send you a reminder notice. There is no penalty assessment for late filing the e-Postcard, but an organization that fails to file required e-Postcards (or information returns – Forms 990 or 990-EZ) for three consecutive years will automatically lose its tax-exempt status.
Loss of Tax-Exempt Status
A Unit that fails to file the required informational return (Form 990-N, Form 990-EZ, or Form 990) for three consecutive tax years will automatically lose its tax-exempt status. The revocation of an organization’s tax-exempt status will not take place until the filing due date of the third year.
For the Unit to have its tax-exempt status reinstated, it must apply (or reapply) for tax-exempt status using IRS Form 1024, Application for Recognition from Exemption. The Unit must also submit IRS Form 8718, User Fee for Exempt Organization Determination Letter Request, and pay the appropriate fee. For Units with annual gross receipts less than $10,000 during the preceding four years, the fee is $400. For Units with annual gross receipts greater than $10,000 during the preceding four years, the fee is $850.
The IRS treats an incomplete return the same as a return filed late – the penalties are the same. For example, if a Unit fails to attach a required schedule 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 The American Legion Auxiliary is recognized as tax exempt, the Unit still may be liable for tax on its unrelated business income. For most organizations, 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. A Unit that has $1,000 or more of gross income from an unrelated business must file Form 990-T. A Unit must pay estimated tax if it expects its tax for the year to be $500 or more. The obligation to file Form 990-T is in addition to the obligation to file the annual information return, Form 990-N, Form 990-EZ or Form 990.
Form 990-T, “Exempt Organization Business Income Tax Return”
The Form 990-T 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.
Contributions to Veterans’ Organizations
Contributions to a 501(c)(19) Veterans’ Organizations are deductible under Internal Revenue Code 107(c)(3). To be eligible to receive tax-deductible contributions under IRC 170(c)(3), at least 90% of the members must be war veterans.
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. The employer is also responsible for state tax withholdings and unemployment taxes.
IRS Determination Letter
On occasion, your Unit may be required to provide proof of your tax exempt status. If the Unit does not already have a copy on file, it can request a copy of the IRS Determination Letter from the National Organization. The Unit will receive a letter explaining the tax exempt status of The American Legion Auxiliary and copies of the IRS letters granting tax exempt status to The American Legion Auxiliary and copies of the IRS group rulings. To obtain copies, contact the office of the National Judge Advocate at (317) 360-1224.
The American Legion Auxiliary is not exempt from Sales Tax.
IRS Website: www.irs.gov
IRS Publication 3386, “Veterans’ Organizations Tax Guide”
IRS Publication 557, “Tax Exempt Status For Your Organization
Please consult your tax professional or visit www.irs.gov to obtain forms.