If the organization has not filed its 990 on time, can board members be liable?

It is ultimately the board’s responsibility to ensure that the organization complies with legal requirements, such as the requirement to file an annual return, Form 990, with the IRS. The IRS may impose penalties on the organization for late returns ($20 per day for each day the return is late. The maximum penalty is $10,000 or 5 percent of the organization’s gross receipts, whichever is less. The penalty increases to $100 per day up to a maximum of $50,000 for organization whose gross receipts exceed $1,000,000). While the penalty is not imposed on board members, late filing or failure to obtain an extension from the IRS for filing the 990, may be evidence that the board is not meeting is legal “duty of due care.” Note that the IRS treats returns that are incomplete in the same manner as if they were late-filed.

  • In a case of first impression in early 2008, the IRS was successful in bringing a criminal action against former officers of Care International, Inc. for, among other fraudulent actions, the organization’s failure to file accurate annual reports with the IRS (Form 990).