You just checked your fiscal calendar, and guess what? It’s time to file the IRS Form 990 EZ.
But there’s a problem.
That deadline is approaching, and it’s approaching fast. We’re talking weeks, maybe even days away, and you’ve got no idea what your next best step is.
So, what do you do?
Unfortunately, this is a spot many nonprofit directors have found themselves in. You solidified your tax-exempt status last year, this year’s deadline snuck up on you, and now you’re doing the mad dash to ensure that status stays in place.
Well, getting the IRS Form 990 EZ can either go easily, or it can go pretty darn hard.
The difference maker?
Here are the 6 things to do before the 990 EZ deadline creeps up this year.
6. Make sure you’re filing the right form.
Let’s get the obvious out of the way:
Whether this is your first time filing or you’ve filed before, you need to make sure you’re filling out the right form.
This matters because your designated filing–let’s say the IRS Form 990 vs the IRS Form 990 EZ—can mean the difference between a 16-page filing form, and one that’s four.
The other thing to remember is that these form designations aren’t fixed for your nonprofit. If your organization exceeds the given threshold for gross receipts or total assets for the IRS Form 990 EZ, then it will bump up to the IRS Form 990.
If it drops down below a certain threshold, you’ll be filing the IRS Form 990-N.
Here’s how these designations break up:
- filed by organizations with gross receipts less than or equal to $50,000
- must be filed digitally
- filed by organizations with gross receipts less than $200,000 and total assets less than $500,000
- can be filed physically or digitally
- filed by organizations with gross receipts more than or equal to $200,000 or total assets more than or equal to $500,000
- can be filed physically or digitally
So, check your organization’s finances against these three forms and make sure first and foremost that you’re filing the right form for your nonprofit before getting started.
After that, you’ll want to…
5. Take the Form 990 Online Course
If you’re filling out the IRS Form 990 EZ yourself, and aren’t using an IRS-approved e-filer (more on that later), you need to know what you’re doing.
And the best way to do that is to learn from the source.
Yup, the IRS has a full online course on filing the IRS Form 990—and by extension its derivatives such as the IRS Form 990 EZ and IRS Form 990 N.
The Form 990 Overview Course is a video series that details everything you need to know about your IRS Form 990 filing.
As you can imagine, the information in this course is delivered drier than a Pinot Grigio and goes down a lot worse. However, the information is helpful and straightforward, and learning as much as you can before filing will be helpful in completing the IRS Form 990 EZ.
If you don’t have time to watch the video, you can always check out their pdf transcript featured here.
So, blow the dust off your best notebook and break out your best pen; class is now in session.
Here’s what you can expect to learn from the course:
- the purpose of the Form 990 tax-filing
- which version of the form you’ll need to file
- how to file your IRS Form 990 electronically
- where to send your physical form, deadlines, and extensions
- the information that will be requested and some time-saving tips to get ahead
With a little bit of information under your belt, it’s time to start gathering the materials you’ll need to file.
4. Review the documents necessary for the Form 990 EZ (and its schedules)
Here are the complete instructions for filing the IRS Form 990-EZ.
To file successfully, you’re going to need detailed information on your finances, organizational structure, and any supplemental materials designated based on your organization type.
Those supplemental documents are called “schedules” and form the IRS Form 990 and its associated derivatives these schedules include:
Schedule A – Public Charity Status and Public Support
Schedule B – Schedule of Contributors (instructions included in schedule)
Schedule C – Political Campaign and Lobbying Activities
Schedule D – Supplemental Financial Statements
Schedule E – Schools (instructions included in schedule)
Schedule F – Statement of Activities Outside the United States
Schedule G – Supplemental Information Regarding Fundraising or Gaming Activities
Schedule H – Hospitals
Schedule I – Supplemental Information on Grants and Other Assistance to Organizations, Governments, and Individuals in the United States (instructions included in schedule)
Schedule J – Compensation Information
Schedule K – Supplemental Information on Tax-Exempt Bonds
Schedule L – Transactions with Interested Persons
Schedule M – Non-Cash Contributions (instructions included in schedule)
Schedule N – Liquidation, Termination, Dissolution, or Significant Disposition of Assets (instructions included in schedule)
Schedule O – Supplemental Information to Form 990 (instructions included in schedule)
Schedule R – Related Organizations and Unrelated Partnerships
When completing your IRS Form 990 EZ, you will find a section of it dedicated to schedules to determine which supplemental documents you must file with your application.
After gathering all your necessary materials, it’s important to know exactly what would happen if you were to *ahem* miss your given deadline…
3. Find out what happens if you miss your deadline
In short, you’ll be fined.
When filing the IRS Form 990 EZ, all applicants must abide by one of these two deadlines:
- 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)
Let’s say you’re getting ready to miss your deadline while gathering the information you need to file.
Don’t panic, you’ve got a little bit of time if you submit your request for an extension.
This request for an extension will give you six more months to file, but it must be filed BEFORE your deadline.
However, if you fail to file before the deadline completely, well…those fines we mentioned come into play.
If you filed late, and your organization has gross receipts less than $1,000,000 for the tax year—which it will if you’re filing the IRS 990 EZ—here’s what going to happen:
- 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.
It’s also important to note that these penalties will get worse if you fail to file for more than three years.
Here’s what happens if you fail to file for too long:
- You’ll lose your tax-exempt status.
- You’ll have to reapply and pay filing fees.
That means your organization will be back to paying taxes again like a normal business.
And the loss of your tax-exempt status will mean you’ll be back to paying taxes again, and nobody wants that, so get that extension in if you feel like you need a little breathing room.
However, if you’re confident and ready to submit your filing…
2. Double check your materials
This is a short one: double check your work.
When gathering your necessary filing information, you want to be as detailed as possible.
Because failing to file and/or submit a complete application to the IRS will result in your application being rejected and sent back to you.
This won’t give you more time to file it either; it will just be considered late at that point and all the associated fines and punishments will apply.
If your filing is missing necessary information or includes obvious mistakes, it will be sent back with a Letter 2695C Returning Form 990 due to Missing Information, requiring you to resubmit your application to avoid penalties and the loss of your tax-exempt status.
Generally, the review and approval process can take months, which means if your application is incorrect and needs to be sent back, it can take a while to find out. As a result, it’s best to take the time to get it right on your first attempt.
As we mentioned earlier, there are schedules associated with your filing, so be thorough in filling out the information requested, and read the application’s directions carefully; missing a section or leaving an area incomplete can cost you more than time.
And lastly, with so much riding on a successful filing, it’s important to recognize when you may need help and…
1. Consider hiring an IRS-approved e-filer.
You knew this one was coming.
Filing the IRS Form 990 EZ isn’t exactly easy or fun. It’s tedious work involving the IRS and taxes, which aren’t the sexiest topics of interest.
If your IRS 990 EZ deadline has crept up on you—either again, or for the first time—it may be time to consider outsourcing the work to a partner whose job it is to know when your deadlines are approaching, gather the necessary information from you, and file on your behalf.
It almost sounds too easy, doesn’t it?
With an IRS-approved tax e-filer, you can focus on what’s important: operating your nonprofit efficiently and expanding.
Rather than spending hours of your personal time learning U.S. tax code and nonprofit filing regulation, you can simply hire someone with the knowledge, technology, and experience to do it for you.
Need help finding an IRS-approved tax filer?
If you’re ready to knock out this IRS 990 EZ filing and get back to the work that matters
Give us a call or click here to contact us directly.