Category: Tax Compliance

Even after obtaining tax-exempt status, organizations must report their financial details, activities, and certain other information by filing an annual 990 return.

Based on information regarding their gross receipts and assets, organizations will file the applicable form.

Which 990 Form(s) Should I File?

• Form 990-N: Filed by organizations with gross receipts of less than or equal to $50,000.
• Form 990-EZ: Filed by organizations with gross receipts less than $200,000 and assets less than $500,000.
• Form 990: Filed by organizations with gross receipts greater than or equal to $200,000 and assets greater than or equal to $500,000.
• Form 990-PF: Filed by private foundations to determine tax based on investment income and to report charitable distributions/activities.
• Form 990-T: Filed by organizations that filed form 990 or 990-EZ and also have unrelated business income of $1000 or more during the tax year.
• Form CA-199: Filed by organizations that obtained tax-exempt status from the California State and Nonexempt charitable trusts to report financial information to Franchise Tax Board (FTB).
• Form 8038-CP : Filed by issuers of certain bonds to claim a refundable credit payment from the Federal Government equal to a percentage of the interest payments on those bonds.
• Form 1120-POL : Filed by certain tax-exempt organizations to report their political organization taxable income.
• Form 8868: Filed by organizations to get an automatic 6-month extension to file their annual tax returns.

Can I File a Form Other Than the One I Qualify For?

Although Forms 990, 990-EZ, and 990-N are intended for organizations with varying levels of income, there is some leeway. If your organization qualifies for 990-N filing (gross receipts less than or equal to $50,000), you can still choose to file a 990-EZ or 990.

Similarly, if you qualify for 990-EZ filing (gross receipts less than $200,000), you can elect to file a long form 990. If your organization has a gross receipt total over the limit of a form, however, you cannot file that form. For example: if your organization’s gross receipts total $100,000, you can file a Form 990 or short form 990-EZ–but you cannot file a Form 990-N.

If your organization is classified as a private foundation, the only form you may file is Form 990-PF.

What if I Filed a Different Form Last Year?

If you previously filed a version of the form and wish to file a different version this year, you can do so as long as your organization’s gross receipts do not exceed the form limit. For example: if you filed Form 990 last year but qualify to file Form 990-EZ instead, you can choose to do so.

Filing a 990 series form may seem like a lot at first, but knowing the basics goes a long way towards getting done with paperwork and getting out into the community. For more information on the different types of forms, you can visit the IRS website here. Happy filing!

Tax exemption means that the net profits of an organization are exempt from federal income taxes. Certain states allow the state-level exemption, but primarily, this status is granted by the IRS. If your organization is new, you may not have obtained tax-exempt status yet. You will have to apply for this status with the IRS. Here’s a quick guide to tax-exempt status for nonprofit organizations.

What are the Benefits of Tax Exemption?

There are a number of reasons your organization could benefit from tax-exempt status, beyond the obvious exemption from federal income tax. Some of the additional reasons to apply are:

• Access grants intended for tax-exempt organizations.
• Possibly avoid state and local sales and property taxes.
• USPS discounts
• Tax-deductible classification for your donations.
• Increased credibility in the eyes of donors and the community.

First Things First

Before applying for tax-exempt status, you’ll need to determine if your organization is a(n):

Do You Have an EIN?

To file these forms, you’ll need an EIN number–something you can obtain, if you haven’t already, by filing Form SS-4 (also available online). You’ll need to include your organization’s organizing documents in your application for tax-exempt status, as well.

Keep in mind:

• If your organization has not existed for at least 3 years, you’ll also need to include financial statements for the current year and proposed budgets for the next two years.
• You must also attach Form 8718 (User Fee for Exempt Organization Determination Letter Request), along with the appropriate user fee. User fees for form 1023 and 1023-EZ must be paid online.

Applying for Tax-Exempt Status

In order for your organization to be recognized as exempt, you must submit an application to the IRS.

• If your organization falls under IRC section 501(c)(3), you must file a Form 1023-series application (this includes charitable, religious, and educational organizations).
• If your organization falls under IRC section 501(c)(4), you must file Form 1024-A. Other organizations will need to file Form 1024.

After You Apply

After you’ve double-checked and made sure to include all the necessary materials and information, you’re ready to submit your application to the IRS. Per the IRS website, applications are processed as quickly as possible–and you can check the status of your application here.

Once you’ve been granted tax-exempt status, there are a couple of things to keep in mind to make sure that you maintain it:

• While tax-exempt status means that your organization is not required to pay federal income tax, you still must report your financial details, activities, and certain other information to the IRS.
• This is done by filing a Form 990 Series annually. Which Form 990 Series you file will depend on your organization’s gross receipts and assets.