This year, the President's list of proposed changes to the Internal Revenue Code includes making e-filing mandatory for exempt organizations, which could benefit both exempt organizations and their donors.
Currently, only large exempt organizations filing over 125 returns per year and small exempt organizations with less than $50,000 in annual gross receipts are required to e-file their annual returns/notifications. Exempt organizations falling between these two extremes are given the choice between e-filing and submitting hard copies of their annual returns.
The President's proposal would require all exempt organizations to begin e-filing their annual returns in the tax year following the year in which the proposal is adopted. Transitional relief would be available for certain exempt organizations for which e-filing presents an undue hardship.
But what are the benefits of such a proposal? First, interactive e-filing forms could help ensure completeness of the information requested and assist smaller exempt organizations in preparing their own annual returns.
Additionally, if all exempt organizations are required to e-file, the information submitted by the exempt organizations could be easily analyzed by the IRS without the time or cost of first converting the data into digital form. Finally, if the IRS were not required to digitize the returns it receives from exempt organizations, the IRS could more quickly make the returns available to the general public.
At this time, it is unclear whether this proposal will be approved. But, the IRS does seem to be moving toward the digital age given the e-filing requirements currently in place and the recent introduction of the Form 1023-EZ Application for Exemption, which can only be filed electronically. Thus, exempt organizations that like to plan ahead may wish to familiarize themselves with the e-filing process so that they are not caught off guard should this or any similar proposal be approved in the near future.
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