Suspension of Electronic Filing for Tax-Exempt Organizations

In recently released Notice 2012-4, the Internal Revenue Service announced that its E-filing system would be unavailable from January 1, 2012, until February 29, 2012, for electronic filing of all exempt organization returns on Forms 990, 990-EZ, and 990-PF, Form1120-POL, U.S. Income Tax Return for Certain Political Organizations, and Form 8868, Application for Extension of Time To File an Exempt Organization Return. Therefore, no organizations will be able to E-file these forms until March 1 whether or not they are required to E-file them. This suspension is due to systems and programming changes being made to the IRS computer system. Form 990-N, the E-Postcard for small organizations, is unaffected by the suspension; it can be E-filed during this period. The complete text of Notice 2012-4 is available at www.irs.gov/pub/irs-drop/n-12-04.pdf

As a result of this suspension, the Service has granted an extension of time to file until March 30, 2012, for certain affected organizations. The extension applies to organizations whose initial due date or first extended due date is January 17, 2012, or February 15, 2012. The extension to March 30 is automatic; thus, there is no need to file an extension application on Form 8868 if an organization is filing electronically or on paper by March 30. Organizations that are normally required to E-file during the suspension period may file on paper during that period. However, they may subsequently receive a notice from the Service asking why they did not E-file their returns. They are advised to respond to the notice by simply stating Paper Filing Pursuant to Notice 2012-4.

It is important to note that the automatic extension does not apply to organizations that have already applied for their second three-month extension, inasmuch as the total extension period is limited to six months. These organizations may file on paper if they wish to file during the suspension period. Organizations that have applied for a second extension and then subsequently file after their extended due date but on or before March 30 will have reasonable cause to take advantage relief from late-filing penalties. Such organizations should attach a statement of reasonable cause for late filing to their return.

If a nonprofit organization has an unextended due date or first extension period within the suspension period and desires to have a full three-month second extension (e.g., a February 15 due date to be extended to May 15) past the March 30 automatic extension, the organization should file Form 8868 on paper by the original due date or first extended due date in order to have the full three-month extension.

All affected organizations should familiarize themselves with Notice 2012-4 and plan the timing of their tax filings and extensions accordingly.