Hey, do you remember the post we wrote last month on the IRS 990 form?
Or the one we wrote a few weeks ago with step-by-step instructions on completing it?
Well, this is different.
Today, we’re talking about the IRS Form 990’s little brother, the IRS 990EZ Form.
The Pepsi Zero to the IRS Form 990’s Original Pepsi, if you will.
And although taxes aren’t exactly fun—there’s a reason Ben Franklin likened them to “death”—as a tax-exempt organization, it’s VERY important to make sure you’re filling out these forms correctly and on time if you want to avoid a run-in with Tax Man Uncle Sam in May.
If the IRS is known for anything, it’s simplicity, easy-to-understand instructions, and award-winning customer service.
However, even among laymen, it helps to clarify things for the back of the room.
With that said, this is going to be a complete breakdown of the IRS Form 990EZ.
Here’s Everything You Need to Know About the File 990EZ Form.
If You’re a Tax-Exempt Organization, You’re Not Getting Out of Filing
If you’re a 501(c)(1) or any variation of that up to a 501(c)(29) you have to file for tax-exempt status.
The same way that for-profit entities file for taxes, every year your organization will be required to file for continued tax-exemption status. And if you fail to file, you’ll lose your tax-exempt status and have to reapply, meaning you’ll be responsible for paying taxes on your non-profit organization in the interim.
So, what qualifies me to file the IRS Form 990EZ?
When your organization has at less than $200,000 in gross receipts OR less than $500,00 in total assets.
Do you have real estate that’s worth $400,000 dollars?
You’re filing the IRS Form 990EZ.
Does your organization own a vehicle worth $10,000 dollars?
You’re filing the IRS Form 990EZ.
Do you have a really nice pen that was bought with funds from your organization?
Congratulations, you’re filing the IRS Form 990EZ.
What’s good about the IRS Form 990EZ is that it’s very similar to the IRS 990, just simpler and shorter—so if you fall within this bracket, kiss your lucky rabbit’s foot because life just got a little easier.
It’s important to recognize that there ARE special organizations that are exempt from filing an annual IRS 990 form. This doesn’t mean they are exempt from filing completely, just that they don’t have to file every year. These organizations are entities like religious institutions and political organizations.
Also, don’t put any personal information in your filing.
These documents are public, so avoid using any identifying information such as social security numbers or bank account information.
Here’s the Purpose of the IRS Form 990EZ
Nobody likes taxes right?
Remember the direct comparison to taxes being like death, and dying…and all that?
Here’s the thing:
The government gets it.
They know citizens wouldn’t pay taxes if they didn’t feel it was absolutely necessary, which is why tax evasion is a felony with a “reward” of 5 years in a federal prison.
They need and want their money, and they aren’t playing around when it’s time to collect.
So, for the U.S. government to willfully allow BILLIONS of dollars to go uncollected, there’d better be a darn good reason—and on the IRS Form 990EZ that’s exactly what they’re aiming to figure out.
That’s why the second page of the IRS Form 990EZ looks like this:
That isn’t a lot of space. But keep in mind it’s a primary question the federal government wants answered.
Throughout the form, the IRS requires your organization to describe its mission or other significant activities in totality, and you’ll also have to disclose financial details such as revenues, expenses, assets, and other liabilities.
So, take it seriously if you want to keep your tax-exempt status. The federal government isn’t simply handing it out—they expect you to prove why you deserve it.
In conjunction with completing the main form (it’s 4 pages), keep an eye out for a dedicated list of “schedules” to be filled out as well. These schedules are requests for supplementary information such as the 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.
When filing, ALWAYS complete all requested information to the best of your ability—the IRS isn’t shy about returning an incomplete form or requesting more information if they don’t have everything they need to approve your tax-exemption request. In that case, they’ll send you back your filing in the mail with a “Letter2695 Returning Form 990EZ due to Missing Information” and order you to resubmit to avoid penalties and the loss of your tax-exempt status.
Don’t Forget to File or File Late…It Will Cost You Dearly
For a rule to be effective, it needs to be tied to a punishment.
And the IRS isn’t known for its flexibility.
So, what happens if you forget to file the IRS Form 990EZ or file late?
First, assuming you file 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.
Sounds expensive right? Just wait…
Because if you fail to file for more than three years, here’s what happens next…
- You’ll lose your tax-exempt status.
- You’ll have to reapply and pay filing fees.
And that means you’re back to paying taxes again.
Here’s how to avoid that:
File the IRS Form 990EZ by one of these two deadlines, depending on your organization.
- May 15th if your organization is 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)
If you’re tight on time, you can always ask for an extension.
As inflexible as the IRS can be—after the fact—if you give them notice by e-filing form 8688 before your deadline, they’ll give you an additional six-months extension on your original deadline.
Pretty cool of them right?
No? Still not a fan of taxes? We get it.
And they do too.
Tired of all this tax-talk? Are you looking for an easier solution?
Click here to contact us directly.