Our Nonprofit Went Over $50,000, Do We File IRS Form 990-EZ? 

Great question! There was a memorandum issued in 2022 from the Office of Chief Counsel (IRS) that covered this topic. The answer is that the organization's tax-exempt status is revoked after three consecutive years of filing a Form 990-N when a 990-EZ or 990 should have been filed. This revocation occurs "by operation of law." In other words, it doesn't matter whether the IRS knows or not, the revocation is automatic. However, the IRS wouldn't take any action and would continue to accept 990-N filings until it became aware, which may never happen. This is one of the reasons there is a steady drumbeat in the nonprofit sector to direct more scrutiny to smaller organizations that applied with Form 1023-EZ and file 990-N. But for now, it can be fairly easy to fly under the radar of the IRS. It is a risk though. I have nonprofits contact me regularly because some organization has offered them a large grant, but is asking for their financials and IRS filings. Unfortunately it became obvious that they were filing the wrong returns and were no longer tax-exempt. Big mess to clean up. Still, there are lots of small orgs filing the 990-N when they should be filing a 990-EZ.

@@NonprofitTaxHelp thank you so much for the information! That is very helpful. Unfortunately our municipal shelter is run by a nonprofit but they file the 990N when they have to at least make a couple of hundred thousand dollars a year. I don't want them shut down but I think they need to be run right.

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