The Internal Revenue Service placed more than 435,000 charities on its revocation list, leaving charities with the prospect of paying income taxes on donations received after the status revocation. According to the IRS, the charities lost their non-profit status after failing to file tax returns for three consecutive years.
The revocation of the non-profit status of these charities also has important implications for their donors. The donors, who contributed an estimated $298.4 billion dollars to these charities in 2011, are facing the loss of deductions they were entitled to as a result of their contribution.
Although a revoked status can cause turmoil in the short run for charities whose status has been revoked, reinstatement is possible. The fees for reinstatement range from $100 to $850, according to the IRS. The charity will also face strict scrutiny, as its financial practices will also be under observation by the IRS before a revocation can be overturned.
According to the IRS, 40% of the total non-profit organizations operating at 501(c)(3) organizations in 2011 were listed on this revocation list. As is apparent, this is no small number. To find out how this could affect you and the deductions made on your tax return, please contact your competent tax professional.
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