Thank you for your question. My name is XXXXX XXXXX X will be happy to assist you today
So you had a social club, and did not file form 1024 to recognize tax exempt status?
Okay. Thank you for that information
If you have gross receipts under $25,000 per year, no tax return is required.
Even if we are not recognized as exempt?
Basically, the IRS will not accept a form 990 from you unless you have applied for tax exempt status. Since you would never file the 990 because your gross receipts are low, then you could get away with not filing for tax exempt status.
Our gross receipts were less than that, however, the do include external fund-raising. Would that have an impact?
But now, you have to file form 990-N that's the problem. I forgot about that one
The problem is that you cannot file any tax exempt tax returns, unless you have tax exempt status...and it's too late to go back because you typically file within 15 months
If there's no tax exempt status, then you would have to file the proper tax return and tax would be due, unfortunately. If you set up as a corporation, you would file form 1120.
We set up as a non-profit corporation.
So you have a corporate status. If the IRS does not recognize you as exempt, you will file form 1120
Fair enough. Does the dissolution of our organization have an impact on that?
You still were a corporation until you were dissolved. You would still have to file the proper tax return
Okay. For a corporation in this situation, what would be considered taxable income?
And lastly, what would be the potential consequences of not filing?
The consequences are that you will owe tax and penalties. Unfortunately
Taxable income is anything that you receive, less your expenses
You're only taxed on the profits
So if we spent 100% of our "income" on the expenses of running our corporation there wouldn't be any tax liability?
that is correct
But, you're still required to file a return
You should have very little income ...
We have next to 0
So that is easy
That's good so the effects will be minimal.
Are there penalties for a corporation that files late?
Yes, it's 5% of the tax due per month, up to 25% of the tax
So if there's no tax due...
The penalty is minimal?
No tax due, no penalty
Megan, you have been extremely helpful this morning