When you established your 501(c)(3) nonprofit, all you did was create an organization separate from a traditional business that has certain rights and limitations.
In terms of limitations, 501(c)(3)s are restricted by their inability to operate as a traditional business, meaning you can’t create and sell products or services beyond a reasonable scope. Otherwise, you will tip into the realm of a for-profit business (also known as a “business”).
On the other hand, the rights you have are chiefly your ability to accept donations and claim exemption status from federal and state income taxes.
But that right that isn’t guaranteed.
That means you’ll have to submit the IRS Form 990 application every year if you want to attain—or retain—tax-exempt status.
However, there is good news.
Filing for tax-exemption status as a 501(c)(3) isn’t as hard as you think if you’ve got a little help.
Here’s how to achieve tax-exempt status using the IRS Form 990.
What is the IRS Form 990?
The IRS Form 990 is the application used by 501(c)(3) nonprofits to apply for tax-exempt status.
It must be filed every year, and even though there are a few exceptions as to which nonprofits have to file if you aren’t a church, political party, or other specially recognized nonprofit, your organization MUST file annually.
And a failure to file as a nonprofit is a serious issue.
Let’s assume you’ve never filed the IRS Form 990…
Then you’ll be responsible for paying taxes on your organization’s gross receipts.
And what if you had tax-exempt status but failed to file for more than three years?
You’ll lose your tax-exempt status and be forced to reapply and pay filing fees.
The key to remember here is that as a nonprofit if you fail to file the IRS Form 990 on an annual basis, you will not be given tax-exempt status.
Tax-exemption isn’t automatic, so learn which form you need to file based on the size of your organization, know your deadline, and get your paperwork in order early.
Why do I need to file?
Because if you want your 501(c)(3) nonprofit to be tax-exempt, filing is mandatory.
Ben Franklin once said, “In this world, nothing can be said to be certain, except death and taxes.”
That’s right, even the man who helped write the Declaration of Independence accepted that there could be no freedom from taxes.
The federal government doesn’t take its revenue collection lightly. So, when granting special organizations tax-exempt status, it takes this conferment seriously.
Which means that the IRS Form 990 isn’t a slip-under-the-door document.
To start, the IRS Form 990 is 12 pages.
That’s TEN pages longer than the standard 1040 income tax form used by individuals.
The application also has more than 12 sections requesting detailed information on finances, organizational structure, and other identifying information. And there are more than 12 sections of the IRS Form 990 (the longest of three forms), and each section is thorough in its specificity of information.
Again, the government doesn’t pass up the opportunity to collect revenue lightly. So, take the form seriously, understand that tax-exempt status is a privilege, not a right, and get your application in as early and complete as possible.
How to file the IRS Form 990
Or…you can hire an IRS-authorized e-filer to walk you through the documentation process and file them for you.
One option will save you time, money, and headaches…
The other means dealing directly with the IRS.
However, regardless of how you choose to file, know that the IRS Form 990 is three variations: the Form 990-N, Form 990-EZ, and Form 990, and deciding which form to file depends on the size and gross receipts of your organization.
Here’s how it breaks down:
Filed by organizations with gross receipts less than or equal to $50,000
Filed by organizations with gross receipts less than $200,000 and total assets less than $500,000.
Filed by organizations with gross receipts more than or equal to $200,000 or total assets more than or equal to $500,000.
When filing, there are two deadlines you must adhere to, 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)
However, if you find yourself or your organization at a loss for time and you know you’ll fail to meet your required deadline, there’s an easy solution.
If you file BEFORE your original deadline, you’ll get an additional six-month extension on your original deadline.
The IRS 990 Form application is complex, and the stakes are high.
If you want your application done correctly, sent on time, and in the best shape to earn you tax-exempt status this tax year, we’ve got you covered at File990.
Looking for a simpler solution when filing this year? We’re here to help.
Click here to contact us directly.