Raise your hand if you do your best to avoid working on nonprofit tax returns. If your hand is up then you are in the majority. Most tax partners, managers and staff avoid them like the plague.
The 990 tax forms are very different from individual and business tax returns and ask a lot of informational questions. As a result, they can absorb a lot of the firm’s time and expense. In addition, since the entity is a charity, it is likely that they will ask for rock bottom prices or ask you do to the tax return as a charitable donation.
Ok, then why does the firm do them?
Usually, it is because the nonprofit tax return is connected to a larger tax or audit client. Technically, the firm could pass on preparing the tax return. But they know that it is not in the accounting firm’s best interest. Therefore, they pass nonprofit returns down to the preparer level hoping to get it prepared as cheaply as possible.
However, if the §501(c)3 organization (the main IRS code section for charities) has an average of $50,000 in gross receipts or less then there is a much easier option. Instead of filing a Form 990 or 990-EZ return, the tax preparer or the client can file a Form 990-N tax return. The tax return is filed online at the following address. http://epostcard.form990.org/ (there is no paper form that can be filed).
The only financial information required is indicating that the organization meets the gross receipts test. The other information is only general data about the organization (e.g., name, address, EIN). The tax return only takes about five minutes to file.
Within a day after filing the tax return the person filing the tax return will receive an e-mail confirmation from the IRS that the tax return has been accepted. This return can be filed for every year that the organization meets the test. However, it should be noted that this return cannot be filed for a private foundation that needs to file the 990-PF tax return.
Let me know in the comments section your experiences with filing the 990-N tax return as well as any other topics that you think that I should explain about exempt organization tax returns.
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I found this information to be very helpful. My only question is, can I as the Founder/CEO file the 990N.
Thanks for the comment. I am glad that I can help nonprofits with an easy way to file their tax return. Yes you can file the 990N form. Basically, the IRS wants someone who has enough knowledge of the nonprofit’s financial information to file the form.
If you found the info helpful I hope you will share this article on LinkedIn or Facebook so others can learn about this easy technique as well.
I need advice on how to handle a non-profit organization that was incorporated in 2014 but never filed for tax exempt status. I have filed out the 501 c3 to the best of my ability but now need to write a letter as to why it wasn’t filed sooner. HELP!!! What should I do/ how should I go about this whole process?
How big is the organization and what type is it? As noted by the following IRS link,
“The following types of organizations are not required to file Form 1023 for recognition of exemption under Internal Revenue Code section 501(c)(3):
Churches, including synagogues, temples and mosques.
Integrated auxiliaries of churches and conventions or associations of churches.
Any organization (other than a private foundation) that has gross receipts in each taxable year of normally not more than $5,000.”
See if the following link fits your organization:
https://www.irs.gov/charities-non-profits/charitable-organizations/organizations-not-required-to-file-form-1023
It’s a non-profit church association. There are 8 board members and we have 5 churches that are affiliated with the association. The affiliated churches are tax exempt, however the association itself is in the process of filing for tax exempt status, by filling out the 501c3.
Will there be a fine since it was founded in 2014? They weren’t aware that they had to file for tax exempt status, they thought it was automatic since it’s part of the church.
The good news is that your organization discovered the error before the IRS did. When it comes to nonprofits the IRS is more concerned with getting the organizations to file their Form 990 tax returns rather than enforcing late filing penalties. But I believe your organization would be well served to get the help of a local CPA firm that can look over the documents you have available and the financial activity of each year to see what needs to be filed.
Can a nonprofit file 990-N and if they go over 50,000 the next year do the 990-ez. Or filed the 990-sz one year and file the 990-n the next
The IRS determines when a nonprofit is able to file the 990-N based on the average of the nonprofits gross receipts over a period of time. Here is the current method used by the IRS. You can find documentation at the following IRS link.
https://www.irs.gov/charities-non-profits/gross-receipts-normally-25000-50000-or-less
An organization’s gross receipts are considered to be $50,000 or less if the organization:
Has been in existence for 1 year or less and received, or donors have pledged to give, $75,000 or less during its first taxable year;
Has been in existence between 1 and 3 years and averaged $60,000 or less in gross receipts during each of its first two tax years; and
Is at least 3 years old and averaged $50,000 or less in gross receipts for the immediately preceding 3 tax years (including the year for which calculations are being made).
As to your first question, many entities start with filing the 990-N in their early years and then progress to filing the 990-EZ or 990.
I have not run into a situation with a nonprofit filing the 990-EZ and then trying to return to the 990-N. My belief is that if the nonprofit was filing the 990-EZ voluntarily (i.e. their receipts met the above test to file the 990-N) the nonprofit could contact the IRS nonprofit helpline at 877-829-5500 to get the entity back to filing the 990-N. However, if the nonprofit ever exceeded the 990-N limit for one year (i.e. the nonprofit had 175,000 in gross receipts) then I do not think it can go back even if it drops below the limit.
I got a little longwinded so I hope that all made sense (heh). If you found my answers helpful then I hope you will share my posts with any accountants and nonprofits that you know. 🙂
Hi, so I have a problem. I’m the new Secretary/Treasurer for a gun club in upstate NY, the club is a non-profit, but never filed for tax exempt status, we have been here for 50+ years, and my predecessor who held the position for 40 years, never filed our taxes. He was apparently told by a lawyer friend of his that since the club was averaging less than $10,000 prior to 2010 that he shouldn’t even bother. So he didn’t. The problem I have now, is that since 2010, our membership has increased to the point where we are now at $30,000 for 2020, and since 2021, we have already hit that mark and it looks like it will continue to rise. My predecessor also thought it would be a good idea to invest so of our money and we are now sitting on roughly $110,000 in investments that are in our club’s name. We also own about 115 acres that our club sits on. Our property and school taxes are paid, but the IRS is another story. Ive tried finding a CPA, as well as a Non-Profit tax attorney, and no one wants to touch this. What can I do?!?