Yep, we also went through this. We were charged over $25,000 in penalties, because our past officers never filed our taxes. We had to write letters and call several times, but eventally, all the penalties were abated. It sure was a relief as we certainly didn't have $25,000 lying around anywhere.
You guys are the best! I feel better able to cope with this now. Hopefully we can get some of this fine reduced or forgiven. Thank you for your advice and support!
Our situation was slightly different. I didn't realize until Feb 07 that our taxes were to be done by Dec 06 (I thought it was due on the regular tax day (Apr 15), and didn't realize the fiscal year made the due date different), so when I finally did them and sent them off, I thought we were in the clear. They sent us a fine notice of $980 and I felt HORRIBLE! My president called the IRS, who told her that we could appeal. She called our lawyer that works at the Board of Ed., and he typed up a letter stating that we were a new board, and as the new treasurer, I had made an honest mistake in the timing of the taxes. We *hoped* that it would be appealed, but we weren't sure, and sort of expected to pay the fine. But a few months later, we got the notice that all of the fines were dropped.
Anyway, my point is, take everyone else's advice, because the appeal process does work with them. Definitely get your lawyer to write the letter or at least help you write one.
We had almost the same happen and our accountant wrote a letter to the IRS and explained what had happen and they dropped all fines. We had to wait few months but it was well worth it in the end. I would keep trying with them as they are very forgiving when it comes to non-profit organizations.
In the area of tax exempt organizations, the IRS is surprising good at "forgiving" the penalties - BUT you have to be patient and persistent.
The letter with the penalty/interest should have given you a number to call. One of the reasons for removal of penalty is "reasonable cause". You can write them, explaining your "acceptable reason" and they can review the matter.
You want to prepare your story - "Our group is a small PTO run by volunteers to support XYZ school. We are trying our best to operate in good faith and have done everything possible to rectify the past incorrect filings (by people who are longer even here), but we don't have the funds to pay such a fine. We're following all the proper steps now and will continue to do so. yada yada...".
So you call them and talk to them about the methods for appealing the fine. Then follow through on whatever steps they tell you.
A few other things. The tax exempt department of the IRS is fabulous. Helpful folks who go above and beyond. Far different than the stereotype IRS. However, you are no longer dealing with them. Now you are dealing with the Penalty section. Completely different. Seen it all. Heard it all. Much more difficult to reach by phone. But still - they are people doing a job and WILL help you if they can. The person on the phone can only direct you. All the real submission/decision will be made in writing.
Again - be patient. When I went through this it was because of a typo (checked the wrong box) on our return. So clearly just an entry error. It still took 6 months to resolve.
Are you done with the IRS? Has the accountant you brought on spoken to them?
Fines are appealable. I'd suggest speaking to them, emphasizing the changes you've put in place to avoid future troubles, etc.
In my experience, IRS has been very helpful and understanding with PTOs and PTAs. Not a guarantee obviously, but worth keeping at it. Tone to take is cooperative and contrite and constructive, not comabtive.
