Guide to IRS Tax Form 990
Your organization may be exempt from taxes, but it still needs to file an annual tax return using Form 990. Although it may seem like an unnecessary hassle, the government uses IRS Form 990 to ensure tax-exempt organizations conduct business properly and are consistent with their responsibilities. Avoiding Form 990 is a sure way to jeopardize your organization’s exempt status and land it hot water with the IRS. Keep reading to ensure you’re complying with your tax obligations or use the links below to answer your most pressing questions.
- What is Form 990?
- What is Form 990 Used for?
- Who Should File IRS Form 990?
- Which Form 990 Do I File?
- How Do I File Form 990?
- How Can Community Tax Help Me With Form 990?
What is Form 990?
IRS Form 990, Return of Organization Exempt from Income Tax, is a financial information statement used to regulate tax-exempt organizations and ensure they are not abusing their tax-exempt status. These returns supply critical information for both the IRS and the public, such as:
- The mission of the organization and its activities
- Names of officers, directors, and highly compensated employees
- Revenues, expenses, assets, and liabilities
It will also include details regarding the organization’s governance and accomplishments which can be used to defend their tax exemption.
What is Form 990 Used for?
Getting an organization tax-exempt under the Internal Revenue Code is very difficult. An organization must prove that its operations, assets, and business structure exist solely to complete its mission. Form 990 is used by the IRS to gather information about an organization’s mission, programs, and finances. Ultimately, it helps the federal government determine whether an organization is operating according to tax-exempt rules.
The IRS will pry through the numbers and look for discrepancies, such as frivolous expenses or undocumented purchases. Since Form 990 is also available to the public, donors and grant-makers may use it to decide which affiliations to donate money to and ensure their donations are used appropriately.
Who Should File IRS Form 990?
If you own a non-profit, you may wonder, “Do I owe the IRS?” The use of IRS form 990 will give you the answer, as it is an annual return that is required to be filed by many tax-exempt organizations. Typically, any tax-exempt organization with gross receipts of at least $200,000 or assets worth at least $500,000 must file an annual tax return using Form 990. The IRS defines gross receipts as the total amount of money an organization received from all sources during its fiscal year (without the subtraction costs or expenses).
However, various organizations are exempt from filing Form 990. This includes:
- Churches and other faith-based institutions, such as religious schools and missionary organizations
- State entities, including universities, that provide essential services
- Subsidiaries of non-profits that will be claimed on the parent organization’s Form 990
- Government corporations
A full list of organizations that must file is available on the IRS.gov website.
Which Form 990 Do I File?
There are several versions of Form 990 that are tailored to specific entities, and it’s crucial to submit the appropriate one. We’ll go over the different types below before diving into the instructions, so you know which one to file.
Form 990-PF: Return of Private Foundation
A private foundation is required to submit Form 990-PF regardless of their asset size if they file at least 250 returns in a calendar year, including income, excise, employment tax, and information returns.
Form 990-N: Electronic Notice
Small, tax-exempt organizations with annual gross receipts of up to $50,000 may be required to file an electronic notice (sometimes called an e-Postcard) using Form 990-N unless they voluntarily file the full Form 990 version.
Form 990-EZ: Short Return of Organization Exempt from Income Tax
Section 6033 enables tax-exempt organizations, nonexempt charitable trusts, and political organizations with annual gross receipts under $200,000 and total assets under $500,000 to file Form 990-EZ instead of Form 990. The EZ version is shorter and designed to help filers make fewer mistakes.
Regardless of the form, you must file on the 15th day of the 5th month after the end of your organization’s accounting period. For example, if your taxable year ends on December 31, 2021, you’d submit your form by May 15, 2022. If you need an extension, use Form 8868: Application for Automatic Extension of Time to File an Exempt Organization Return.
It’s important you file Form 990 on time, as failing to file for three consecutive years could result in your tax-exempt status being automatically revoked. Organizations whose eligibility was revoked is also public knowledge. The IRS publishes this information and can be searched using their tax-exempt organization tool.
Moreover, your organization could face hefty fines and penalties. Under section 6652(c)(1)(A), failure to file penalties for non-profit tax returns is usually $20 per day the return is late, not to exceed the lesser of $10,000 or 5% of the year’s gross receipts. For organizations with gross receipts over $1,028,500, a penalty of $100 per day will be assessed each day failure to file continues (with a maximum penalty of $51,000).
How Do I File Form 990?
If you don’t qualify for any of the 990 alternatives mentioned above, non-profit organizations with gross receipts over $200,000 and assets over $500,000 must complete the entire Form 990. The form itself is quite lengthy, as it is composed of 12 parts. We’ll go over each section briefly, so you can ensure your organization has the necessary information to complete the form.
- Part I requires you to summarize your organization’s activities and governance, revenue, expenses, and net assets or fund balances.
- Part II is the Signature Block. This section must be signed under penalty of perjury by the organization’s president, vice president, treasurer, or other eligible officers. If you hired a preparer to help with your form, they’d also sign this part.
- Part III asks you to provide details about your organization’s mission, accomplishments, and expenses and revenue tied to the three largest services offered by your org.
- Part IV is a checklist of required schedules you must fill out if eligible.
- Part V asks you questions about IRS filings and general tax compliance. This is another section in which you have to check yes or no, depending on the statement. Here, you’ll see things like “Did the organization have unrelated business gross income of $1,000 or more during the year?” and “Is the organization licensed to issue qualified health plans in more than one state?”
- Part VI requests information about your organization’s governing body, management, policies, and disclosures.
- Part VII will include your organization’s current or former officers, directors, trustees, key employees, employees paid more than $100,000, and independent contractors receiving more than $100,000 in compensation.
- Part VIII is the Statement of Revenue. Under this section, you’ll provide the IRS with your organization’s revenue from both exempt and unrelated funds. If you have any unrelated business income, you’ll have to file Form 990-T.
- Part IX is used to report your organization’s functional expenses. For example, accounting services, grants, lobbying, employee benefits, payroll, travel, and more.
- Part X requires you to submit your organization’s balance sheet. All organizations must submit this section.
- Part XI is the Reconciliation of Net Assets. Here, you provide the revenue totals from previous sections, including Part VIII, Part IX, and Part X.
- Part XII is the final section of the 990 tax form. In this part, you’ll explain the accounting method used to prepare the form (cash, accrual, or other) and whether your financial statements were compiled and reviewed by a public accountant.
You can get Form 990 online as the IRS provides detailed instructions and examples on how to complete the form. However, because of the length and how vital the document is to your organization, we recommend working with a professional tax accountant.
How to File Form 990 Electronically
For tax year 2020 and later, your organization must file all 990 forms electronically using an IRS authorized e-file provider. If your organization fails to e-file, it may be assessed with penalties from the IRS, even if a paper tax return is submitted.
Where to Mail Form 990?
There are a few circumstances in which tax-exempt organizations don’t have to file electronically, including:
- Organization name changes
- Short-year or short-period returns (except for short period final returns)
- Organizations not being recognized as exempt due to a pending application, for example
- If you’re filing a Form 990 older than 2 years prior to the current tax year
You don’t need a waiver for the situations above, but one will be required if your organization can’t file because of technology setbacks or if fulfilling the e-filing requirement would result in financial hardship. For more information, read the IRS Notice 2010-13.
If you need to mail your Form 990, use the following address:
Internal Revenue Service Center
Ogden, UT 84201-0027
This address should also be used to mail Form 990 alternatives, such as the 990-EZ and 990-PF.
How Can Community Tax Help Me With Form 990?
If you need help filing your organization’s Form 990, our trusted tax professionals can ensure it’s completed fully and without errors. Protect your organization’s tax exemption and remain in good standing with the IRS by working with us at Community Tax. We also offer free consultations, tax resolution assistance, bookkeeping and accounting services, and more so your organization’s mission can continue to prosper.