What This Notice Means
CP254 goes to a tax-exempt organization or private foundation that sent in a paper annual return, such as Form 990 or Form 990-PF, when it may be required to file electronically. If the organization is required to e-file, the paper return doesn't satisfy its annual filing requirement. As far as the IRS is concerned, the return hasn't been filed.
The e-file rules have expanded. For tax years beginning after July 1, 2019, exempt organizations generally must file Form 990 and Form 990-PF electronically, unless an exception in the form instructions applies. Form 990-EZ filers must e-file for tax years ending July 31, 2021, and later. Returns for older years that can no longer be e-filed are paper filed.
What to Do
If the organization is required to e-file, file the return electronically as soon as possible. If the electronic return is filed after the due date, late filing penalties can apply. If you have reasonable cause for the late filing, include a statement with the electronic return explaining why.
If you believe the organization is not required to e-file, complete the response form that came with the notice. Check the reason that applies or explain it, sign it, and send it back in the envelope provided.
If You Ignore It
An organization that must e-file and doesn't will face failure-to-file penalties. There's a bigger risk: an organization that fails to meet its annual filing requirement for three consecutive years loses its tax-exempt status. Getting it back means filing a new application and paying the user fee.
Check whether earlier years were also paper filed. Each year counts toward that three-year rule. Keep the notice, your e-file acknowledgment, and any response you send.
If your organization received a CP254 and has missed filings, call us at (813) 229-7100.