This is the fantastic letter that a nonprofit client of ours (finally!) received! The letter notes that the $6,252.15 penalty they were getting assessed has been removed...balance due is $ZERO! However had they not come to me, or another competent accountant, when they did they likely would have gotten stuck with that fine.
Like many nonprofits, there is board turnover. This is even more true with organizations like PTO organizations, rec leagues, etc who sometimes have annual turnover. All/most board members are truly trying to help and do what their supposed to do...however the problem that some of these boards run into is that unless you have consistency no one really knows what they're supposed to do and things can fall through the cracks.
This is what happened to this client.
On top of a naturally tough board environment, the organization had been using Jackson Hewitt...because at some point that's where someone went to prepare the tax return so all subsequent people were told to go there. This is a major problem for two main reasons.
1. In general, Jackson Hewitt (and other non-CPA tax prep companies like it) is not designed and the people people working there do NOT possess the knowledge to prepare accurate nonprofit tax returns. Many people think "well nonprofits don't pay tax, so who cares?" Well that's wrong...as the letter above shows, there are heavy fines for inaccurate tax returns. In this case, there were two schedules that JH just didn't bother filling out and, reportedly, told the client that they weren't really necessary...this is after they received the fine of over $6k for specifically not having filled out those very schedules. JH was still somehow suggesting they didn't really need them. (????) I could go on and on about how just absolutely terrible of a job they did preparing this tax return...but I'll stop there.
2. Companies like this do not track their client base like (good) CPA firms do. Every year I have a slew of clients that I don't hear from until well after April 15th has come and gone, but they know that I'll be filing an extension for them on their behalf. This didn't happen at Jackson Hewitt for this client. Like many nonprofit organizations, they do not have a calendar year end...they are an August 31 year end, which means their tax return is due January 15th. That day can easily come and go with a new board member totally unaware that it is the filing deadline.
In addition to all of that, if you a nonprofit organization doesn't file for 3 consecutive years, they automatically get their nonprofit status revoked. I've reinstated a couple now...and it's expensive and very time consuming!
After 2-3 just terrible, lazy attempts by Jackson Hewitt, I was elated that my letter was able to get this penalty removed! (So was the client, obviously!)
So even though it may seem like an unnecessary cost to pay a CPA firm to prepare your annual 990, I assure you that it is worth it and vital to the financial health of your organization!