Tax-Exempt Status Revoked by Mistake: A Case Study in Reinstatement

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The purpose of this cased study is to demonstrate a typical interaction with the IRS. This is a case where the IRS made an error which had serious implications for a tax-exempt organization. I was able to resolve the issue, but not without patience, persistence, and knowledge of the law.

This is a case where a tax-exempt organization's 501c3 public charity status was erroneously revoked under section 6033(j) for failure to file a return on time for three consecutive years.

How did the IRS make this mistake? There are two possible reasons I can think of. First, the August 31 fiscal year end may have confused the IRS and they may have posted the 2012 extension requests to the 2013 year.

More likely, the IRS employees were confused by language that appeared in Revenue Procedure 2011-44 which stated that revocation takes place on the due date of the third late return, "without regard to any extensions of time to file."

All this really means is that if the third return is not filed by the extended due date, revocation is effective as of the original due date, not as of the extended due date.

As long as the return is filed by the extended due date, revocation should not occur.

This 12 minute video takes you step-by-step through the approach I used to get the IRS to fix their mistake.