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June 18, 2021
2021-1221

IRS will require private foundations to electronically file Form 4720 due July 15, 2021 or later

An IRS update posted on June 16, 2021 announced that any private foundation completing a Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, due July 15, 2021 or later must file the form electronically. The IRS encourages, but does not require, other organizations filing Form 4720 to do so electronically.

Background

The Taxpayer First Act, enacted July 1, 2019, requires tax-exempt organizations to electronically file information returns and related forms for tax years beginning on or after July 2, 2019. (See Tax Alert 2019-1255.) Although this mandate applies to Form 4720 filed by private foundations, the IRS has accepted paper filings of the tax year 2019 and 2020 versions of Form 4720, pending the form's conversion to electronic format. (See Tax Alert 2020-2901.)

Form 4720 in electronic form

The IRS announcement states that the tax year 2020 Form 4720 and its instructions are now available for e-filing, along with several software options for filing electronically. Information about the software providers supporting electronic filing is available here on the IRS website.

Despite requiring electronic filing for Forms 4720 due on or after July 15, 2021, the IRS is making a "limited exception" for tax year 2020 Forms 4720 due on or after July 15th that were submitted in hard copy with a postmark date on or before June 16, 2021.

Implications

The IRS continues to update approved e-file providers and legislation related to e-file mandates. Tax-exempt organizations should evaluate what electronic filing tools and options are available so they can comply with these mandates. Prospectively, tax-exempt organizations should continue to adjust their compliance processes as the IRS continues to move toward electronic filing requirements for all returns and related forms.

Filing requirement guidance from the IRS can be found here.

Please contact your EO professional for further information.

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Contact Information
For additional information concerning this Alert, please contact:
 
Tax-Exempt Organization Services
   • Terence Kennedy (tery.kennedy@ey.com)
   • Melanie McPeak (melanie.mcpeak@ey.com)
   • Vickus DeKock (vickus.dekock@ey.com)
   • Tiyesha Johnson (Tiyesha.Johnson@ey.com)
 

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