Correct, most of the IRS rules (about non-profits) are based on gross revenue. The rule of thumb about formalizing if you bring in more than $5000 is also on gross revenue.
I'm not a big fan of going backwards in these types of issues. It's honestly not a matter of ethics (or lack thereof) but practicality. You owed no taxes. The return due was informational. Yes, you probably should have filed. If you file now (for previous years), you will get assessed fines of $20 per day late fees. That will likely be thousands of dollars. Then you will spend the next 6 months negotiating with the IRS, who actually will most likely waive the fines. It will involved worry and effort on your part as it hangs over your head and staff time for them to resolve it.
What purpose will have been served? I work in government (not the IRS) and I can tell you, there are times they just don't want to know - especially in a situation like yours where no fraud was intended, no one was deprived of money due, and you will now file correctly since you belatedly understand the rules.
We have also been in contact with the IRS and it is indeed gross revenue. Our school's gross revenue is below $25K (we are small school only about 160 kids) so we only have to fill out the EZ form and then check that we are below 25K and we can stop from there. If you make more than 25K it just means you have to fill out the entire form. The form isn't that bad, we are also in the process of getting our permanent 501 3c status (we were awarded a 5 year temp status) so between that and the EZ form I really am IRSed out!
Wondering if anyone has any insight into this topic/question...
My Treasurer contacted me and explained that he has been in contact with the IRS regarding the filing of taxes. He was in the process of submitting and was trying to understand a few key questions. One has to do with Gross Revenue.
From what he explained the IRS wants to know about gross revenue. Our previous Treasurer explained that there was a $25K cap on profits, not revenue, but it was explained to the Treas. that it is indeed gross revenue. (By cap I mean that you did not have to file if you were below the cap).
I honestly can't see how any group could keep their gross revenue below $25K. By Gross Revenue it means, for example, that when we have our Yankee Candle Fundraiser and collect over $20,000, that even though we only profit $8000 of that the entire $20K counts against us in regards to the "gross revenue". My Treasurer figured out that even though we only raised around $23K for the year, our Gross Revenue was about $77K.
His belief is that because of this we should have been filing since 2005 or 2006 (I guess the rules were changed back then).
Does anyone have any insight into this?
Has anyone had a similar issue, and if so how did you handle it/what were the repercussions?
