Whether you’re filing as a U.S. nonprofit for the first time this year or you’re a tried-and-true tax expert just looking for a refresher, this guide is here to break down some of these key tips.
Tax season can get complicated, and if you’re filing for a nonprofit organization there are a few extra steps thrown in. The brunt of this process, and the main difference between filing as a nonprofit vs. a business or an individual, is going to be filing IRS Form 990.
In this guide, we will cover:
- The purpose of Form 990
- Choosing which version to file
- Ensuring you file on time
- Consequences of missing the deadline
- Information to exclude
- Tools and resources that can help
These six topics will explain what you’ll need to know to get your nonprofit filed in no time. Ready to get started? Let’s jump in.
1. Understand the purpose of Form 990.
The 990 form is what allows your nonprofit to maintain tax-exempt status. The main purpose is to ensure that nonprofit organizations are indeed working towards the social good, thus justifying their lack of taxes. The form is publicized after submission, which allows potential donors access to the organization’s purpose, income, allocation of funds, etc., enabling donors to make an informed decision about where they want to give. It also ensures that their gift is able to be filed as a tax-deductible donation!
2. Choose which version to file.
There are four main versions of the 990 tax form:
- Form 990: If your gross receipts are over $200,000 or total assets over $500,000, you have to complete the full 990 form.
- 990-EZ: If your gross receipts are less than $200,000 AND total assets less than $500,000, you may complete this simpler 990-EZ version.
- 990-N: For nonprofits with gross receipts averaging less than $50,000, you may complete the simplest, online form instead (also known as the 990 Postcard).
- 990-PF: All private foundations must complete the 990-PF version of the form, regardless of gross receipts and/or total assets.
After determining your organization’s filing status, you can get started on the necessary paperwork.
3. Ensure you file on time.
The deadline for submission of the form varies depending on how your organization files its taxes. Your deadline is on the 15th day of the 5th month after the last month of your organization’s fiscal tax year. Sound confusing? Here are a few examples:
If your fiscal tax year ended in August, your 990 would be due January 15th of the following year. And if your fiscal year ended in January, your 990 would be due June 15th of that year.
If your nonprofit joins the masses that follow the Calendar Tax Year, your forms would be due on May 15th.
And if that due date starts to sneak up on you, consider filing for an extension via Form 8868, which will allow you 6 additional months to complete your tax forms.
4. Know the consequences of missing the deadline.
There will be fines and the possibility of losing your tax-exempt status if you don’t file on time. Possible repercussions include:
- There will be a penalty fee of $20 per day that the form is late. (With a max penalty of $10,000 or up to 5% of gross receipts.)
- Larger organizations (gross receipts above $1,000,000) will pay a penalty of $100 per day, with a maximum of $50,000.
- If your organization fails to submit form 990 for three consecutive years, you will lose tax-exempt status (meaning more paperwork AND more fees).
You really want to get that form in on time— the IRS isn’t playing around!
5. Do not include excess information.
Be sure to leave out any personal identification information. Because the form is made public record, it is important that you only include information that is requested in the form. Excess information like social security numbers, bank account logins, and passwords are unnecessary and only put you and your organization’s security at risk.
6. Seek out tools and resources that can help.
If you’re still not feeling great about all this tax talk, feel free to check out one of these two types of resources that can help:
Prep courses: You can take IRS tax prep courses online that can allow you to go into tax season feeling more ready than ever. These courses can cover how to apply for and maintain tax-exempt status, required information, etc.
E-filers: If you want to simplify the filing process as much as possible, consider using e-filing software. These programs maintain data security, ensure your form is filed on time, and create an all-over simpler experience.
Featured Photo: Saving Lives With Emergency Care in Rural Uganda by Global Emergency Care Collaborative
Taking advantage of online tools can allow for a smooth process for your organization this tax season. With these six tax-filing tips, you should now know all you need to know to jump into filling out your 990. Good luck and happy filing! More of my tax-focused content can be found on the File990.org blog.