Let’s be frank here…
Nobody likes filing taxes.
And even fewer enjoy paying them.
The reason for this is because tax forms were created to be universally applicable, which means they’re general to a point, but can become maddeningly complicated with each line.
And this process is made that much more difficult if you’re filing as a non-profit, tax-exempt organization, and the IRS Form 990 is involved.
And though electronic filing has made the process more accessible, digital filing has only made sending your returns easier. You’ll still need to know how to file, what to file, and when to do it.
Basically, you still need to know what you’re doing. And the IRS isn’t known for its ability to make things simple.
As a result, filing a return properly and on time can feel like a scene straight out of Terry Gilliam’s Brazil.
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Like this, but with more sweatpants.
And we get it completely. Which is why we’re here to make things easier.
So, here are the 5 Facts You Need to Know Before Filing IRS Form 990.
1. Unless special conditions are met, you have to do it.
It’s easy to forget that once you’ve established your non-profit organization, you still have to file for tax-exemption status. Sure, you may not be required to pay taxes under the protections of an IRS 990 form, but the purpose of the form is to retain your tax-exempt status. If you don’t file, you will lose it (more on that later), so keep that in mind when tax time hits.
How do you know if you need to file an IRS Form 990?
When your entity has at least $200,000 in gross receipts OR $500,00 in total assets.
That house your organization meets at? The one that costs $600,000?
Yep, that counts.
If your assets are lower than $500,000 or you collected less than $200,000 in gross receipts, you’ll be bumped down to a the simpler—and shorter—IRS Form 990-EZ or IRS Form 990-N.
Now, although you MUST file, there are certain conditions under which a special organization, religious institution, or political organization will be exempt from filing an annual IRS 990. The keyword there is annual. They’ll still need to file at some point. So, always keep in mind that no one’s exempt.
Lastly, don’t put any personal information in your filing.
These documents will be made public, so avoid using any identifying information such as social security numbers or bank account information.
2. You’re going to have to prove you deserve tax-exempt status
Remember when I mentioned that no one likes paying taxes?
Yeah…the government knows that.
So, when individuals create non-profit organizations that are outside of the “special organization” status of charity, political, and religious organizations, the IRS is going to make sure the non-profit organization has earned its tax-exempt status.
That’s a lot of money the government is letting go of, so they take the filing of the IRS Form 990 very seriously. The government requires your organization to describe its mission or other significant activities succinctly and fully. Then, you’ll have to disclose financial details such as revenues, expenses, assets, and liabilities.
Here’s what it looks like:
That’s not a ton of space. But keep in mind it’s the first thing the federal government wants to know.
So, take it seriously if you want to keep your tax-exempt status.
3. The form has a few other supplemental documents
That’s right. Unfortunately, the IRS 990 isn’t a simple form. To start, it’s 12 pages. On top of that, it’s got a section dedicated to a list of “schedules” which are essentially qualifying questions that will determine the structure of your organization and instruct any requirements for additional information and documentation.
These schedules could include a Schedule of Contributors (a list of all your contributors), Schedule D to provide more detailed financial statements, a Schedule F to report your organization’s level of activity outside the United States and a Schedule G to describe your organization’s fundraising activities.
And be sure to pay attention to these requirements and file everything correctly. If you don’t, the IRS will send your filing back with a Letter2695C Returning Form 990 due to Missing Information and require you to resubmit to avoid penalties and a loss of tax-exemption status.
4. If you forget to file it or file it late…there will be repercussions.
What are rules without punishments?
Enter the IRS.
File your IRS Form 990 late or “forget” to file it entirely and you’re going to be facing big problems.
Let’s assume you file it late and your organization has gross receipts less than $1,000,000 for the tax year…
- You’ll be imposed a penalty of $20 per day for each day the return is late.
- The max penalty is $10,000 or 5% of the organization’s gross receipts—whatever is less.
- Special note: If your organization’s gross receipts exceed $1,000,000, that daily penalty shoots up to $100 per day, with a maximum charge of $50,000.
No fun, right?
Well, if you fail to file for more than three years here’s what happens…
- You lose your tax-exempt status.
- You have to reapply and pay filing fees.
Want to avoid paying money unnecessarily?
Then file IRS Form 990 at one of these two deadlines depending on your organization.
- May 15th if your organization if following the Calendar Tax Year.
- The 15th day of the 5th month after the last month that concludes your fiscal tax year.
- For example, if your fiscal tax year ended in April, you would file your taxes September 15th)
5. If worse comes to worst, you can always file an extension
We all lose track of time.
If you find yourself or your organization in a position where you know you’ll fail to meet your required deadline for filing, there’s an easy solution.
If you do that BEFORE your original deadline, you’ll get an additional six-month extension on your original deadline.
Is your head spinning from all this tax-talk? Want an easier solution?
Click here to contact us directly.