What CP141L means
CP141L says the IRS charged your exempt organization a penalty because it did not file its return by the due date. The IRM title is precise: We Charged a Penalty Under Internal Revenue Code Section 6652(c), Form Filed Late. Internal procedures say the notice generates when an exempt organization return is received late, has missing or incomplete information, or both.
The IRS asks you to send the amount due by the date on the notice to avoid interest.
Why you got it
Most organizations exempt under IRC 501(a) must file an annual information return under IRC 6033. When that return arrives after its due date, including any extension, or arrives without required information, IRC 6652(c) imposes a penalty. CP141L is how you find out.
Common reasons are predictable: a volunteer treasurer moved on, the extension was never filed, the e-file provider rejected the return and no one noticed, or schedules were left off.
How the penalty works
IRC 6652(c)(1)(A) imposes a penalty for each day the failure continues.
- Base rule. $20 per day, capped at the lesser of $10,000 or 5 percent of the organization's gross receipts for the year.
- Larger organizations. For an organization with gross receipts over $1,000,000 for the year, $100 per day, capped at $50,000.
Those are the statute's base figures. IRC 6652(c)(7) adjusts them for inflation for returns required to be filed in calendar years after 2014, so the daily rate and cap on your notice may be higher. The notice shows the calculation the IRS used.
The statute also says the penalty applies to a failure to include required information or to show correct information. An incomplete return can be penalized the same way as a late one.
A daily penalty rewards speed. Every day the return stays late or incomplete, the number grows until it hits the cap.
Reasonable cause
The penalty does not apply if the failure was due to reasonable cause. The IRS's CP141L page says that if you think you have reasonable cause for filing late, provide a signed explanation outlining the circumstances. Its FAQ says to send that written statement to the address at the top of your notice.
A strong statement does four things:
- States the facts that caused the delay, with dates.
- Explains why those facts were outside the organization's control, or why it acted with ordinary care and still could not file on time.
- Shows how quickly the organization filed once the obstacle was removed.
- Includes documents: medical records, resignation letters, disaster declarations, e-file rejection notices.
Be specific. A statement that says "our treasurer was busy" will not get far. A statement that shows the treasurer was hospitalized for six weeks in the month before the due date, with records, is a different case.
What to do now
- Confirm the return. Check the period, the filing date, and whether the return was complete.
- Fix anything missing. If information was left off, supply it. An incomplete return continues to accrue the penalty.
- Decide: pay or explain. If you agree, pay by the due date to avoid interest. If you have reasonable cause, send the signed statement.
- Keep proof of what you sent and when.
- Fix the process for next year: who files, when, and how you confirm acceptance.
Electronic filing
IRC 6033(n) requires exempt organizations to file their annual returns electronically. The IRS's CP141L page points to its e-file information for charities and nonprofits. If a paper return was sent, it may not satisfy the requirement. Use an approved e-file provider and save the acceptance confirmation every year.
The bigger risk
A late return is better than no return. IRC 6033(j) automatically revokes exempt status if an organization fails to file a required annual return or notice for 3 consecutive years. If CP141L shows a pattern of late filings, take it as a warning. See our guide to CP120A for what revocation looks like.
Know your filing requirement
The IRS's CP141L page links to its annual filing requirement information. Which form you file, Form 990, Form 990-EZ, Form 990-PF, or the Form 990-N e-Postcard for small organizations, depends on the type of organization and its financial size. Confirm it each year, especially after a year of growth.
Board responsibility
Annual returns for exempt organizations are often handled by one volunteer. When that person leaves, the filing goes with them. The board should know the due date, who is responsible, whether an extension was filed, and when the e-file acceptance came back. A one-line item on the board's calendar each year prevents most CP141L notices.
If the organization uses a paid preparer, ask for the acceptance confirmation as part of the engagement, and keep it in the organization's records rather than the preparer's.
Interest and payment
The IRS's CP141L page says to send the amount due by the date on the notice to avoid interest charges. If the organization is requesting relief, consider whether to pay first and ask for a refund if relief is granted, or to request relief before paying. Paying stops interest from growing while the request is reviewed. Either way, do not let the notice date pass without doing something.
What not to do
Do not ignore the notice because the organization is small. Small organizations are capped at a percentage of gross receipts, but the penalty is still real.
Do not send a reasonable cause statement without facts and documents.
Do not let the officer who received the notice sit on it. Board members should know.
Do not file next year's return late while this one is being sorted out. A second penalty undercuts the reasonable cause story for the first.
The law behind CP141L
IRC 6652(c)(1)(A) imposes the daily penalty and its caps, and excuses it for reasonable cause. IRC 6652(c)(7) adjusts the amounts for inflation. IRC 6033 sets the filing requirement, including electronic filing under IRC 6033(n) and automatic revocation under IRC 6033(j). IRM 21.3.1.7.14 describes CP141L.
If your organization needs help with a penalty relief request, call us at (813) 229-7100.