Form 990 | Frequently Asked Questions & Tax-Filing Tips
Filing a Form 990 is one of those tasks that all non-profits must complete. Yet, there are a surprising number of common and not-so-common tips that non-profit leaders can take to make the filing process easier and more beneficial to your organization.
In this blog and accompanying video, we break down the top tax-filing tips for a smooth 990 – and the surprising opportunity to tell your organization’s story.
First of all, what are the filing requirements?
Unless the organization is classified by the IRS as a school, a church, or a governmental unit, all non-profits are required to file an annual return. The requirements are based on revenue, so if the organization’s gross receipts are $200,000 or more, or the organization has more than $500,000 in assets, they are required to file the full form 990. For smaller organizations with gross receipts of less than $200,000 or less than $500,000 in assets, there’s the shorter 990 E-Z. And then, the 990-N, which is a simple postcard, is for organizations who normally have less than $50,000 in gross receipts.
The 990 series are due on the 15th day of the fifth month following the organization’s year end (e.g., if the organization’s calendar year ends December 31st, their filing date would be May 15th).
If the organization doesn’t file a return for three years consecutively, the IRS will revoke the tax-exempt status, so filing is critical. The IRS also requires all exempt organizations to electronically file their tax returns now for any year beginning after July 1, 2019.
Are there different requirements at the state level?
Each state is different, but 47 out of the 50 require an exempt organization to register as a non-profit if the organization is soliciting contributions from that state’s residents.
It’s best to check any state that the organization is soliciting contributions from to verify if the organization has a filing requirement for that state. If they’re conducting activities or have a physical presence in that state, it’s recommended the organization file in that state.
For example: if the organization is in Indiana, under the Secretary of State filings, then they must register as well under the Department of Revenue. You can read more about the annual filing requirement on the Indiana Department of Revenue’s website.
What are some other items that are unique to the form 990?
The 990 series is open for public inspection, so it’s critical the tax return be reviewed by a CPA or tax professional. Not only is it an exceptional opportunity to not only show the financial story to the public, but also to describe the organization’s accomplishments on page two of the 990 – it’s a great opportunity to tell the organization’s story to prospective supporters.
Organizations can show how contributions are used, how they were applied to the mission, and what you’ve accomplished during the year. The 990 also shows governance policies, compensation, and transactions with interested persons. That means when the return is accurately completed, it can be a valuable resource to attract donors and grantors to your organization.
What do the organizations have to publicly disclose?
Every exempt organization must provide a public disclosure copy of the 990. And for any exempt organization, other than a section 527, you can white out the names and addresses of the large contributors who would be listed on schedule B.
A Form 990-T filed after August 17th, 2006 is also required to be provided to anyone who asks for a copy. Finally, if the form was filed after July 15th, 1987, the Application For an Exemption (Form 1023) must also be provided to anyone who asks for it.
Is there a penalty for filing late?
These returns are due on the 15th day of the fifth month after your year-end, and organizations can obtain an extension of six months. That gives them eleven months after their year-end to file the return.
There can be a $100 penalty per day if the organization has gross receipts greater than a million dollars and don’t file the Form 990 on time. That penalty can add up quickly, diverting funds from the mission.
What is unrelated business income, and what does it have to do with a 990-T?
Even though an organization is exempt from tax, there are still activities that generate earned revenue that could be subject to income tax. There are three questions you should ask yourself when changing or adding new activities to your exempt organization:
- Is the activity a trade or business?
- Is the activity regularly carried on?
- Is the activity not substantially related to the exempt purpose of the organization?
If the answer to any of these questions is yes, the activity may be unrelated business income. It the activity is determined to be unrelated business income, the organizations will need to file a Form 990-T if they had more than a $1,000 of gross receipts in a year. It has the same filing deadline as Form 990.
What else do you want to learn?
You can watch the full video that includes these questions and more, on our video gallery. Don’t forget to subscribe for regular updates and fresh perspectives on financial management for non-profits.
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