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Some EOs Could Face Late-Filing Penalties Over Glitch

Posted on Mar. 4, 2019

Tax-exempt organizations that haven’t filed their information returns on time because of a recent problem in the IRS electronic filing system could face late-filing penalties even though they’re not to blame.

However, those exempt organizations can request penalty relief, according to Margaret Von Lienen, EO director, IRS Tax-Exempt and Government Entities Division. Under a new system introduced last year, the IRS has been asking organizations with electronic filing identification numbers (EFINs) if they want to maintain their EFIN accounts. If an organization doesn’t respond within 60 days, its account is terminated.

However, Form 990 returns filed by EOs weren’t included in the new system, Von Lienen told the TE/GE Exempt Organizations Council meeting in Baltimore February 22. As a result, some organizations have been unable to e-file because their EFIN accounts were erroneously shut down, she said.

And because it’s impossible for the IRS to “broadly determine” whether an EFIN account has been terminated erroneously, the agency cannot prevent late-filing notices from being issued in those circumstances, Von Lienen said. “If an organization had to file a paper return or was late filing their return because of the EFIN problem, that penalty notice is still going to go out and be posted,” she said.

Organizations whose EFIN accounts were terminated in error should request abatement of the late-filing penalty, Von Lienen said. Her staff has talked with the IRS Wage and Investment Division’s submission processing personnel on handling the abatement requests, she said. The IRS told Tax Notes February 25 that the EFIN problem had been solved.

Examinations

Von Lienen said it probably will be “a couple of years” before the IRS conducts examinations on the EO provisions of the Tax Cuts and Jobs Act.

In the meantime, the IRS has been educating its examination agents on the provisions, with more training expected this summer, Von Lienen said. “We know that our agents get questions when they’re out in the field and [are] meeting with taxpayers about those things, so we want to make sure they have the information they need to be able to answer those questions if possible.”

IDR Experiment

Maria Hooke, director of IRS EO examinations, confirmed that the agency has a pilot program allowing some electronic exchanges in the information document request process.

Although the EO division isn’t yet part of the pilot, “we hope to be there very soon,” Hooke said.

Troubleshooting

EOs calling the IRS for help with various problems — for example, an incorrect address on file — should be prepared to bring agency reps up to speed if subsequent calls are needed, Hooke said.

If the problem persists after initially calling the EO customer account services line (877-829-5500), the organization should call again, with all the information from the first call on hand so the process doesn’t start again from the beginning, according to Hooke.

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