Failure to file new IRS form 990-N could lead to loss of exempt status for smaller nonprofits

The Pension Protection Act also directs the IRS to revoke the tax-exempt status of any organization that fails to file an annual return, including the 990-N, for three consecutive years. Revocations will happen automatically beginning in May 2010.

Experts have long believed that many defunct organizations are listed as active in the IRS files. (Exempt nonprofits are required to inform the IRS when they go out of business, but many don't.) It is unlikely, however, that they add up to half a million.