Federal

The IRS requires a federal tax return for every fiscal year (or tax year) an organization exists. Typically, tax years follow calendar years, though an organization may choose a different fiscal year when forming. For example, an organization providing after-school tutoring may set their fiscal year to coincide with the school year and run August through July.

A nonprofit must report to the IRS, even during its partial initial year. Just as families can claim tax credits for babies born on December 31st, nonprofits formed at any point during the year are required to file a federal tax return. These are known as form 990, and they come in multiple versions depending on the organization’s classification and revenue. We’ll discuss the different versions next.

Note: In a few very rare circumstances, an organization may be exempt from filing 990 tax returns. Churches are an example of organizations exempt from 990s. The nonprofit’s Letter of Determination will indicate if 990s are required. Again, in almost every instance, the organization is required to file 990s. Even organizations exempt from filing 990s may choose to do so since they are a good means of accountability and record keeping.

  • 990 N: This is the simplest version of 990 the IRS offers. It is only available to organizations who earned less than $50,000 of revenue during the tax year. Suppose an organization was non-operational yet still legally active. In that case, it must still file a 990 N. Many states, including New York, prevent organizations from filing a 990 N due to their state filing requirements. These organizations must file a 990 EZ and require attaching the filed return to the state document. Additionally, a 990 N can only be filed for the three most recent tax years.
  • 990 EZ: Organizations earning less than $199,999 in revenue or organizations filing past-due 990s older than three years must file the 990 EZ. Unlike the 1023 EZ, which is only three pages, the 990 EZ contains many pages of information detailing all income and expenses. There are also additional schedules for specific details required by the IRS, depending on your organization’s operations.
  • 990: Organizations earning more than $200,000 in revenue file the vanilla 990. Similar to the 990 EZ, the 990 goes into even greater detail on the organization’s operational details.
  • 990 PF: Private Operating Foundations have a specialized tax return known, the 990 PF. Similar to the 990 EZ, this form contains specific information required for Private Foundations.

Because nonprofit organizations are public entities, annual tax returns are public filings. They are generally available on the IRS website for review by potential donors. It’s vital to ensure your federal tax returns are accurate and filed on time.

Form 990 filings are due on the 15th day of the 5th month following the conclusion of an organization’s tax year. For example, an organization with a fiscal year ending on May 31st would need to file their 990 by October 15th. For organizations following a calendar year tax year, 990s are due on May 15th of every year. An organization can extend its 990 due date for six-months by filing Form 8868 with the IRS before the nonprofit’s 990 due date.

Failure to file a 990 or an extension by the due date bring fines of $20 per day until filing ($10,000 maximum penalty per 990). For nonprofit organizations earning more than $1,000,0000 in revenue, that fine becomes $100 per day the 990 is late ($50,000 maximum penalty per 990). It is absolutely imperative that the organization file 990s on time.

If an organization fails to file their 990 for three consecutive years, the IRS will automatically revoke 501c tax-exempt status. Revocation is a horrible situation for any nonprofit and means individual and corporate donations are no longer tax-deductible. Losing tax-deductible status alone can dry up all potential funding sources for a nonprofit. As if that weren’t bad enough, having 501c status revoked means the corporation is now liable for paying taxes.

Failure to file 990s is the most common reason organizations lose their status. Reinstatement is possible but costly and time-consuming. Reinstatement can also provide issues with Charity Registration renewals in the future. It is much less expensive to remain in annual compliance.

BryteBridge has a team of tax professionals capable of handling your organization’s reporting needs. Plus, we have affordable packages that combine your required 990 with filing requirements unique to your state, as described next.

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