Organization does not qualify for the Reduced Tax on Net Investment Income [F990PF-006-01] - How do I resolve it?
55 views | Last modified 5/7/2024 7:30:15 AM EST |

IRS  Error code: Form 990-PF: [F990PF-006-01]

Rejection Message: 

The IRS has rejected the return since the organization is filing its initial return and doesn’t qualify for the Reduced Tax on Net Investment Income under Section 4940(e).

What does it mean:

If the domestic foundation meets the requirement of the Section 4940(e) and has initial returns, then the foundation doesn’t qualify for the Reduced Tax on Net Investment Income based on the adjusted qualifying distributions and the net value of the non-charitable use assets for years starting from the current year to past five years.

Resolution:

Follow the below steps to correct the organization's choice on Qualification Under Section 4940(e):

1. From the home page, select the organization and the tax year.
2. You need to click on the Rejected by the IRS button for the rejected return to find the list of errors. Then, click the Fix Me button to resolve the rejection error. 
3. Based on the filing type you have chosen, you will be navigated to the corresponding page.
   • Interview-based filing - You'll be directed to the Qualification Under Section 4940(e) page. Under "Qualification Under Section 4940(e)", select NO.
   • Form-based filing - You'll be directed to Part V of Form 990-PF. Here, select No to state that the foundation qualifies under section 4940(e)
4. Follow the subsequent steps as prompted.
5. Review the details, and click the Transmit button to re-transmit your return to the IRS at no additional cost.

For any further assistance, we recommend contacting the IRS e-Help Desk Toll-Free Number 1-866-255-0654.