Nonprofit Federal Filing Basics
Posted on Wednesday, February 13, 2013 Share
Nonprofit organizations are tax exempt and do not file income tax returns. However, the IRS still wants information on a nonprofit’s programs and activities and therefore, requires nonprofits to file informational returns. Churches and certain church related organizations are not required to file information returns, but most other tax exempt organization are required to file.
So which federal return does your organization need to file?
Form 990-N, e-Postcard
Organizations with gross receipts that are normally less than or equal to $50,000 are required to file Form 990-N. Gross receipts are considered to be $50,000 or less if the organization
- Has been in existence for 1 year or less and has $75,000 or less of gross receipts during the first tax year;
- Has been in existence 1 to 3 years and averaged $60,000 or less of gross receipts during each of the first 2 tax years;
- Has been in existence at least 3 years and averaged $50,000 or less of gross receipts for the immediately preceding 3 tax years (including the current year).
IRC section 527 (political) organizations and section 509(a)(3) supporting organizations are not eligible to file form 990-N. These organizations must file either Form 990-EZ or 990, depending on their revenue and assets.
Form 990-N must be filed electronically. The IRS provides a link to the Urban Institute’s website where Form 990-N can be filed - http://epostcard.form990.org/. This is the simplest form that nonprofits can file, as it only asks for 8 pieces of basic information.
- Annual tax year
- Check the box for:
- Has your organization terminated or gone out of business?
- Are your gross receipts normally $50,000 or less?
- Name and d/b/a (if applicable)
- Employer identification number
- Name and address of principal officer
Form 990-EZ, Short Form Return of Organization Exempt from Income Tax
Organizations with gross receipts that are less than $200,000 and total assets that are less than $500,000 are required to file Form 990-EZ. These organizations may choose to file Form 990; however, many chose to file Form 990-EZ as it is easier to file and less comprehensive than Form 990.
Form 990-EZ asks for information on the organization’s exempt and other activities, finances, compliance with certain federal tax filings and requirements, and compensation paid to certain persons. Additional schedules are required to be completed depending on the organization’s activities. The most common schedules required are Schedule A, Public Charity Status and Public Support and Schedule B, Schedule of Contributors. Schedule A is used to determine the sources of the organization’s support and to determine if it meets the public charity requirements. Schedule B provides a listing of the organization’s larger contributions.
Form 990, Return of Organization Exempt from Income Tax
Organizations with gross receipts that are greater than or equal to $200,000 or total assets that are greater than or equal to $500,000 must file Form 990. Similar to Form 990-EZ, Form 990 requests information on the organization’s mission, programs and finances. However, Form 990 also asks additional questions on the board’s activities, compliance and legal requirements and ethics. When Form 990 was revised in 2008, the IRS wanted to enhance transparency and encourage compliance which resulted in additional questions on governance.
Form 990 consists of an 11 page core return and 16 potential schedules that may need completed depending on the organization’s activities. As with Form 990-EZ, Schedule A and Schedule B are two of the most common schedules required with Form 990. Schedule D, Supplemental Financial Statements, which provides additional detail on financial information and Schedule G, Supplemental Information Regarding Fundraising or Gaming Activities, which provides additional detail on special events are also commonly required by most nonprofit organizations.
No matter which form your organization is required to file, it is due by the 15th day of the 5th month after your organization’s accounting period ends. For example, if your organization follows the calendar year, the filing deadline is May 15th. You may request an automatic 90 day extension of time to file Form 990 and 990-EZ by filing Form 8868, Application for Extension of Time to File and Exempt Organization Return, by the filing deadline (i.e. May 15th). An additional 90 day extension may also be granted by the IRS for reasonable cause, extending a calendar year nonprofit’s due date to November 15th.
Failure to file the return by the required due date results in penalties of $20 per day, up to $10,000 or 5% of the organization’s gross receipts for the tax year. If your annual gross receipts exceed $1 million, the penalty is $100 per day, up to $50,000 per return.
Posted by: Carrie Minnich, CPA
Posted in Mission Minded Nonprofits