Many nonprofit organizations are eligible for an income tax relief from the federal government by receiving tax-exempt status. They can apply for the exemption status by filing a Form 1023 and submitting it to the IRS. If the IRS accepts the tax-exempt status request, the nonprofit organization becomes officially recognized as exempt and won't need to pay any federal taxes.
Organizations must file their annual information return with the IRS to maintain their exemption status - this annual nonprofit tax information return is commonly called the Nonprofit 990 Form Series.
What is Form 990?
Return of Organization Exempt From Income Tax, or IRS Form 990, is a form that many tax-exempt organizations and nonprofits use to report their activities each year with the IRS. These Nonprofit tax form 990 collect various information from exempt organizations like program, mission, and finances, and they allow the IRS and the general public to evaluate a nonprofit organization’s operations.
To avoid fraudulence, the IRS has revised the terms and conditions of Form 990 in recent years by collecting more information like principal officers, employee compensations, and other essential information.
The IRS requires exempt organizations to file a nonprofit tax return every year to maintain their tax-exempt status.
Which 990 Form Should a Nonprofit Organization File?
Nonprofits and other tax-exempt organizations are required to file either the Form 990, 990-EZ, or 990-N (e-Postcard) based on their organization's gross receipts.
The following information from the IRS helps to determine how nonprofit organizations should choose which 990 form to file:Form 990 (Long Form)
Large nonprofit organizations with gross receipts greater than or equal to $200,000, and total assets greater than or equal to $500,000 must file Form 990 - also known as the Long Form.Form 990-EZ (Short Form)
Medium-size nonprofit organizations with gross receipts less than $200,000, and total assets less than $500,000 must submit a Form 990-EZ return which is known as the Short Form.Form 990-N (e-Postcard)
Small nonprofit organizations with gross receipts less than $50,000 should file Form 990-N referred to as an electronic postcard or e-Postcard 990-N.Form 990-PF
Private Foundations with funding typically coming from single primary donations by individuals or businesses, which the foundation handles with its trustees and directors, should file Form 990-PF.
Which Nonprofit Organizations are Exempt From Filing IRS Form 990?
Many tax-exempt organizations need to file their information tax returns; however, the following organizations do not need to file a 990 form:
- Faith-based organizations like religious schools, missions or missionary organizations
- Certain churches listed in the Tax Guide for Churches and Religious Organizations
- Subsidiaries of other nonprofits whose parent group files group returns
- Government corporations
- Some state institutions providing a necessary service such as a university
Check with the IRS to ensure if your nonprofit organization has an exemption from filing a tax return.
When Should an Exempt Organization File a Tax Return?
Exempt organizations must file the required Form 990, 990-EZ, 990-N, or 990-PF by the 15th day of 5th month after the end of their tax year. For instance, if your organization operates under a Calendar Tax Year, which is from January 1 to December 31, you must file the appropriate 990 form on or before May 15 of the following year.
If you are not yet ready to file your information with the IRS by the due date, you can also apply for an automatic 6-month extension by filing the Extension Form 8868.
What Are the Penalties for Organizations Filing Late?
It is crucial for exempt organizations to file their information tax return on time and avoid getting penalized. The IRS imposes a penalty of $20 per day up, with a maximum fee of $10,000, or 5 percent of the organization's total revenue if gross receipts are less than $1,000,000. For organizations with gross receipts exceeding $1,000,000, the penalty increases to $100 per day with a maximum fee of $50,000.
If an exempt organization continuously fails to file its tax return for three consecutive years, the IRS will automatically revoke their tax exempt status. Many nonprofits have lost their exemption status simply for failing to file on time.
Organizations that lose their exemption status are subjected to pay federal income taxes. To get your status reinstated, the IRS requires you to re-apply with a Form 1023 which includes user fees and possibly submitting many additional
documents with the IRS.
Can the Public View a Tax Return From a Nonprofit Organization?
Yes, the public is allowed to view an information tax return from any charity or nonprofit organization recognized by the IRS.
Exempt organizations must make their IRS Form 990 and their exemption application available for public inspection through their regional and district offices without any fees and during regular business hours. Because the IRS requires exempt organization information returns to be open for public inspection, many nonprofits make their 990 tax returns
available for viewing on their websites.
How Can I Complete My Form 990 Information?
The IRS accepts information returns either through the paper filing method or the e-filing method. Organizations who are not familiar with tax form preparation may seek the help of CPAs or tax preparers who specialize in preparing the
Form 990 for exempt organizations.
Though most organizations and tax preparers use traditional paper filing to submit an information return, the IRS suggests using an IRS-authorized, e-file provider as it significantly reduces the time and effort it takes to prepare and file a 990 form.
E-file With ExpressTaxExempt - A Cloud-Based software for Exempt Organizations to File Form 990 Returns
- ExpressTaxExempt is the market leader for nonprofit organizations choosing to file their information returns online.
- After signing up for free, ExpressTaxExempt clients can begin preparing their 990 forms by entering their basic organization information.
- At ExpressTaxExempt, you can quickly and easily complete your 990 form with our step-by-step, interview-style process without needing to be a tax expert.
Why E-file with ExpressTaxExempt?
- Step-by-step, interview-style form preparation
- Supports E-Filing of Form 990, 990-EZ, 990-N & 8868
- Amended return support for Form 990 and 990-EZ
- Schedule support for Form 990 & 990-EZ
- Cloud-based capabilities with a built-in error check
- Support for adding and managing additional users or inviting them to review your returns
- Support for Extension Form 8868
- U.S.-based customer support
We are located in Rock Hill, South Carolina, and provide expert assistance to our clients who have questions about e-filing their 990 returns with our cloud-based software.
We are always ready to help our clients via phone, live chat, and 24/7 e-mail support.
We're available from 9 a.m. to 6 p.m. EST at 704.839.2321 or chat live with us on our website. You can also send your queries to our support e-mail (firstname.lastname@example.org)