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Comment by cperciva | Hacker News Reader

we've Never filed returns since our first re-organization to the LLC in 2005. I was taken by surprize that the IRS hit us so rudely.

Wait, am I reading this right? They've never filed tax returns for the past 8 years, but it's "rude" for the IRS to do something about it?

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It changed in 2008 for 501c3s: http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizati...

Having been in another non-profit that also failed to notice this, if you ask the IRS very nicely, they'll usually let you come back into compliance quickly.

This is why laws need change logs for when they are modified. I knows bills have something of the sort, but they are hard to follow. Anyone who finds a specific set of laws relevant can subscribe to them and get an email when the law is changed.

But they only became a 501(c)(3) in 2012. Before that 2005-2012 they were an LLC, and so thus most definitely weren't exempt.

Mr. Kreitman, X.Org accountant, is an idiot.

If they were late to file for ONE year... maybe I'd be more sympathetic. But NEVER filing?

Incompetence. Stupidity. There's no nicer way to put it, no other way to spin it.

yeah, if it is actually the case that they have had no revenue and no costs, then filing a 990 is dead simple. You write down a bunch of zeroes. It literally takes an hour. More importantly though, why did the board not clamp down on them?

Isn't the fact that it takes an hour to say nothing happened a proof that the tax reporting system is way too convoluted ?

Note that I'm not speaking in this particular case or trying to say it's not his fault (it is), but in general.

No? (If it really is just writing down a bunch of zeroes, though, it probably doesn't take a whole hour.)

You do have to do a bit more than write down zeroes, you have to put your EIN on the top of every page, make sure your addresses are all correct, make sure you didn't miss any of the other little things, then take it to the post office, etc, etc, etc.

It's seventeen pages of zeros and checks. If you want to see what a zeroed 990 looks like: https://drive.google.com/folderview?id=0By7AdX1eMEY2LUp6SG1T...

The careful eye will note on p. 13 where I screwed up on the e-version, and so the scanned (and sent) version has hand-written checkmarks. It's a good idea to dot your eyes and cross your ts on these forms.

There's also a 199 there, which is the state equivalent of the federal form.

Not really. Consider that you're spending an hour per year to say that nothing happened for that whole year.

http://www.irs.gov/pub/irs-pdf/f990ez.pdf is probably what they needed to file.

In the case of non-profits, the IRS is providing oversight that the non-profit is actually acting as a non-profit and doing good (very broadly defined) in the world. It's a check against people running a non-profit that doesn't do anything but make a few people rich.

X.org should probably be filing the full 990, especially if they expect to (someday) be pulling a lot of contributions. The 990EZ is more like for small local outfits that don't really expect to ever get big and expect to be mostly run on volunteer labor for the foreseeable future. They could get away with filing a 990EZ, but getting into the practice of doing the full 990 is not a bad idea.

Small local nonprofits can probably even file the 990-N, an "e-postcard"

Surprisingly the IRS really does not make life difficult for non-profits.

Maybe. 501(c)(3) is a special class of tax exempt organization where not only is the organization exempt for taxation, but donors can claim a tax deduction. So in a certain way it's a privilege, not a right.

I'm as libertarian as they come, but corporate taxes and all their byzantine systems are not like a personal income tax, where you can go to jail or have your wife and child shot for not paying up - it kind of is an opt-in system. So there is somewhat of a categorical difference.

With receipts under $50k they could do a 990N, which is pretty much "what is your name?" and job done. (Their 2012 status report said they were spending $20-30k per year from a roughly $200k pot, with little attempt at raising more money for the time being.)

if it is actually the case that they have had no revenue and no costs, then filing a 990 is dead simple.

If they had no revenue are they even required to file at all? I know that for personal income if you do not owe any additional tax than has already been collected then there is no requirement to file.

Since they didn't get 501c3 status until 2012, the 990 doesn't seem appropriate except for this most recent year anyway.

>If they had no revenue are they even required to file at all?

Yes.

> Since they didn't get 501c3 status until 2012, the 990 doesn't seem appropriate except for this most recent year anyway.

All nonprofits with an EIN need to file 990s even if you don't have 501(c)(3) status. Corporations are not individuals so there are different rules. The rules for registered nonprofits are stricter than for-profits - AND screwing them up can jeopardize attempts to get 501(c)(3) down the line, although typicially the IRS will be reasonable, if you make a handful of trivial mistakes here and there they won't kill you.

That just sounds like incompetence; and from the article it seems that mismanaged accounting has been a recurring problem.

> we've Never filed returns since our first re-organization to the LLC in 2005.

I'm sure plenty of HNers can attest, you aren't exempt from taxes because you're an LLC. Plenty of us file our own LLC taxes, yet a 'professional' accountant in charge of a full organization thought it would be an OK business thing to ignore altogether?

Hopefully they find better representation, this is egregious.

The article never calls him a "professional accountant". He's the accountant of X.org, but in fairness, he's really a system engineer. He's never been an accountant anywhere: http://www.linkedin.com/pub/stuart-kreitman/5/185/942

So he's really just an engineer that they gave the accounting work to. That probably explains quite a bit.

Not really. Most engineers I know are at least smart enough to know that if you don't pay your taxes for eight years you're going to have a problem with the IRS.

Yup, experience taught me that in 1/8th of that amount if time.

Actually he's Treasurer, which means he has responsibility for an organization's money, but does not necessarily perform the functions of an accountant. When giving the role to someone without any particular expertise, you would expect a professional accountant to be retained to advise and assist in any nontrivial case.

But since nobody thought to file taxes (or make sure they got filed), I'm assuming they didn't think to do that either.

This degree of incompetence is troubling, especially given the massive array of resources X.Org could have called on for help in ensuring the foundation was being run correctly.

the wording isn't clear. I thought they were saying "a person employed by Oracle as an accountant, who also happens to be the accountant of X.org". They appear to be saying "a person that is employed by Oracle in some role, who also happens to be the account for X.org"

Wait, income from an LLC would normally just be filed on the member's individual income tax returns right? Not file its own stand-alone return.

Also: I've had little issues with my own returns and have always found them to be reasonable and friendly.

I'm not a US citizen, but I would expect the IRS to behave differently when dealing with organizations as opposed to citizens?

That's the purpose of a corporation. That's why we have something called a judicial person. To separate this kind of thing.

I think the phrase you are looking for is a "juridical person."

Well they are demanding money that doesn't belong to them, and they threaten you with physical violence or death if you refuse to comply. I don't even think "rude" is a proper description for that type of behavior. I consider it extortion.

How did they get the status to begin with if they never filed taxes?

The law changed relatively recently. It used to be that 501c3s didn't have to file if they didn't have income.

Where, "relatively recently" means 5 years ago.

For organizations like that one I was associated with who had been tax exempt for 40+ years, yes, relatively recently.

I don't mean to say 5 years is ancient history, just to give some context, as it certainly wasn't implemented last year. 5 years is not an unreasonable timeframe in which to learn about changes!

Do you actively and regularly check for changes in all laws that might apply to you?

Certainly not every category of law, but I do pay close attention to tax law, and I'm not even an accountant.

X.Org didn't officially gain 501(c)(3) status until 2012. It is reasonable to wonder why the IRS didn't notice before granting.

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