Two thing in life are unavoidable, right? Death and Taxes. Well this isn’t exactly as true as everyone thinks it is. There are tax-exempt organizations in the U.S. which do not pay taxes to the federal government. That doesn’t mean they don’t ever have to deal with the IRS, though. In fact, tax-exempt organizations have very much to do with the IRS, form the moment they apply for tax-exempt status to the first time they must file their tax return.
Yup, you read that right: tax-exempt organizations must file a return with the IRS every year, just like the rest of us. It’s called Form 990 and it’s available online in PDF format for downloading, filling out and submitting to the IRS. Find it here on the IRS website.
What is IRS Form 990?
Form 990 is what the IRS calls an “informational return”. That means there will be no tax due. It’s for collecting information, not taxes. For tax-exempt organizations, it’s the law that their information be made public. That’s what Form 990 is for. They report their financial and organizational information via the form, send it to the IRS, and the IRS makes it available to the public, through third-party companies.
Who Must File IRS Form 990?
Any tax-exempt organization that has its status under Section 501(a) or 501(c)(3) must file form 990. This includes:
- Section 527 Political Organization with gross receipts more than $25,000
- organizations where tax-exempt status has not yet been determined
Other Versions of Form 990
There are some exceptions, depending on gross receipts and type of organization. There is also a Form 990-EZ, for tax-exempt organizations that are smaller and who don’t bring in as much money. There is also Form 990-N, which is a mini form (even shorter than the EZ version of the 990), for very small organizations. Here’s the breakdown:
- Gross receipts less than $50,000: Form 990-N
- Gross receipts less than $200,000 & Total Assets less than $500,000: Form 990-EZ
- Private Foundations file Form 990-PF
- Taxable private foundations: 990-PF
Tax-Exempt Organizations Not Required to File
Some types of tax-exempt organizations not only get out of paying income taxes to the IRS, but they also do not have to file informational returns! Even if they meet other criteria described above, such as having more than $500,000 in total assets and more than $200,000 in gross receipts for the year, there is no requirement to file any version of IRS Form 990, not even the EZ version or the N version, which is a postcard.
- Churches
- A Church school (but not a college…it must be below the college level)
- Local wings of political organizations
- Foreign organizations located in the US, whose gross receipts are less then $50,000
How to File Form 990: You Can File Electronically
Form 990s are due May 15…one month after federal income tax returns are due. Tax-exempt organizations not only get out of paying taxes to the IRS but they also get an entire month longer to get their paperwork in! Plus they can use IRS Form 8868 to apply for a 3-month extension. There is actually a penalty for failing to file IRS Form 990: $20 a day, which is pretty steep. For the big rich tax-exempt organizations with gross receipts of more than $1 million for the year, it’s $100 a day!
Huge tax-exempt organizations must file electronically…if total assets are more than $10 million then electronic filing is mandatory. If such an organization files on paper it won’t even count in the eyes of the IRS. For more info on how to e-file Form 990, visit the IRS website’s e-file page here.
Filling Out IRS Form 990
First of all, let this tell you about the complexity of this form: the Instructions for IRS Form 990 are 99 pages long! This suggests that getting outside help in the form of an accountant or tax lawyer might be advisable, at least for the first couple of years of existence until someone in the organization can learn how to file the form.
There are numerous attachments to be make, statements to write, and other non-usual aspects of an IRS form. We are all about DIY in taxes, but we admit that the 990 might require some help from a professional.