Ultimate Guide to Non-profit Tax Filing

This ultimate guide to filing taxes for a non-profit is designed to help you comply with IRS regulation. The truth is, there is far too much conflicting and incorrect information on the internet when it comes to Not-for-Profit organizations. Even many CPAs are lackadaisical in there approach to non-profits. I’ve spent decades working for charities and performing tax work for them. Let us get started.

What non-profits file tax forms?

In the United States, most non-profit organizations are required to file some form of tax return with the Internal Revenue Service (IRS). The specific form depends on the organization’s annual gross receipts and total assets. The main types of non-profit tax-exempt organizations include:

501(c)(3) Organizations

These organizations are exempt from federal income tax and are eligible to receive tax-deductible charitable contributions. Examples include charitable, educational, religious, and scientific organizations. Form 990, 990-EZ, or 990-N (e-Postcard) is typically filed.

501(c)(4) Organizations

These organizations are civic leagues, social welfare organizations, and local associations of employees. They are exempt from federal income tax but donations to them are not tax-deductible. Form 990 is generally filed.

501(c)(6) Organizations

Business leagues, chambers of commerce, and professional associations fall into this category. They are tax-exempt, but contributions are not tax-deductible. Form 990 is commonly used for filing.

501(c)(7) Organizations

Social and recreational clubs are covered by this category. They are tax-exempt, but contributions are not tax-deductible. Form 990 or 990-EZ may be required.

501(c)(19) Organizations

This category is for certain veterans’ organizations. They are tax-exempt, and contributions can be tax-deductible. Form 990 or 990-EZ is typically filed.

501(c)(29) Organizations

These are qualified nonprofit health insurance issuers. They are exempt from federal income tax, and Form 990 or 990-EZ is generally filed.

It’s important for non-profits to comply with IRS regulations and file the appropriate forms to maintain their tax-exempt status. Additionally, state-specific requirements may apply, so organizations should check with their state’s revenue department or regulatory body for additional filing obligations.

Why do Not-for-Profits file a tax form?

Maintaining Tax-Exempt Status

Many non-profits are granted tax-exempt status by the Internal Revenue Service (IRS). Filing the appropriate tax forms is a way for these organizations to demonstrate that they are operating in accordance with the conditions that qualify them for tax exemption. Failure to file required forms could result in the loss of tax-exempt status. If you are struggling with years of unfiled 990 tax returns, see this article on Getting Current on Non-profit Tax Returns.

 

Transparency and Accountability

Filing tax forms, such as Form 990, provides a level of transparency and accountability to the public and donors. These forms contain information about the organization’s finances, activities, and governance. This information helps donors make informed decisions about contributing to the organization.

 

Regulatory Compliance

Non-profits must comply with federal, (IRS) and state regulations to maintain their legal status. Filing tax forms is a regulatory requirement, and failure to comply can lead to penalties, fines, or the revocation of tax-exempt status.

 

Public Disclosure

Tax-exempt organizations are required to make certain information available to the public. The information disclosed in tax forms helps stakeholders, including donors, government agencies, and the general public, understand how the organization is using its resources and fulfilling its mission.

 

Preventing Abuse of Tax Benefits

Filing tax forms helps prevent abuse of the tax-exempt status. The information provided in these forms allows regulatory authorities to monitor the activities and financial transactions of non-profits to ensure that they are not engaged in activities that would jeopardize their tax-exempt status.

 

Statistical and Research Purposes

The information collected through tax forms is used for statistical and research purposes. It helps government agencies, researchers, and policymakers understand trends in the non-profit sector and assess the impact of these organizations on communities and society.

 

Filing tax forms is a crucial aspect of non-profit governance, ensuring compliance with regulations, maintaining transparency, and upholding the integrity of the tax-exempt status granted to these organizations. It also serves the broader goal of providing information to the public and regulatory authorities about the non-profit’s activities and financial health.

When are non-profit taxes due?

 

The deadline for filing non-profit tax returns can vary depending on the organization’s fiscal year and its tax-exempt status. In the United States, most tax-exempt organizations are required to file an annual information return with the Internal Revenue Service (IRS). The specific form to be filed depends on the organization’s gross receipts and total assets.

 

Form 990

This is the main form used by tax-exempt organizations to provide information on their activities, governance, and finances. The due date for filing Form 990 is the 15th day of the 5th month after the end of the organization’s fiscal year. For calendar-year organizations, this means May 15th.

 

Form 990-EZ

Some smaller organizations with gross receipts less than $200,000 and total assets less than $500,000 may be eligible to file Form 990-EZ. The due date for Form 990-EZ is also the 15th day of the 5th month after the end of the fiscal year.

 

Form 990-N (e-Postcard)

Organizations with gross receipts normally $50,000 or less may be eligible to file Form 990-N, also known as the e-Postcard. This form is due by the 15th day of the 5th month after the close of the organization’s tax year.

 

It’s important for non-profit organizations to be aware of their specific filing requirements and deadlines to avoid penalties and maintain their tax-exempt status. Extensions may be available in certain circumstances, but it’s generally advisable to file on time or seek an extension if needed. As well, the IRS now requires public charities to e-file, a requirement that recently changed. You are no longer able to mail in paper copies of the tax forms.

What does non-profit tax filing cost?

There are a host of factors that affect the cost of tax filing for a non-profit. However, most small organizations generally pay between $750-$1,500 on average. Very small non-profits can pay as little as $200 for the postcard return 990N, or $250-$1,000 for a 990EZ. For example, our office handles small to midrange organizations and out average 990 is around $800.

 

Where do non-profits file tax forms?

Non-profit organizations in the United States file their tax forms with the Internal Revenue Service (IRS), which is the federal agency responsible for overseeing tax matters. The specific form that a non-profit organization needs to file depends on its size, structure, and activities. The most commonly used forms for non-profits include Form 990, Form 990-EZ, and Form 990-N (e-Postcard).

 

The IRS website provides detailed information, instructions, and resources for non-profit organizations regarding tax filing requirements. Additionally, non-profits may seek guidance from tax professionals or legal advisors to ensure compliance with all relevant regulations.

States generally require some form of reporting also. This is done by various methods like Public Charity filings or Charitable Trust filing. You are usually required to submit the 990 along with other state specific documentation. Filing dates are aligned with the organizations tax filing due date.

What taxes is a non-profit exempt from?

Non-profit organizations in the United States that qualify for tax-exempt status under section 501(c) of the Internal Revenue Code are generally exempt from federal income tax. The most common type of tax-exempt status for non-profits is 501(c)(3), which includes charitable, religious, educational, and certain other organizations. Here are some of the taxes from which non-profit organizations are typically exempt:

 

Federal Income Tax

The primary benefit of obtaining 501(c)(3) status is exemption from federal income tax on the organization’s income. Donors to 501(c)(3) organizations can also generally deduct their contributions from their taxable income.

 

State Income Tax

Non-profit organizations that are recognized as tax-exempt by the IRS are often exempt from state income tax as well. However, state laws can vary, so organizations should check the specific regulations in their state.

 

Property Tax

Many non-profits are exempt from paying property taxes on real estate and personal property used for their tax-exempt purposes. However, the details of property tax exemption can vary by state and locality.

 

Sales Tax

Non-profit organizations may be exempt from state and local sales taxes when purchasing goods and services for their tax-exempt activities. This exemption usually applies to items directly related to the organization’s mission.

 

It’s important to note that while non-profits are generally exempt from these taxes, they may still be subject to certain other taxes, such as payroll taxes for employees and unrelated business income tax (UBIT) on income generated from activities not directly related to their tax-exempt purpose.

 

Non-profit organizations must meet specific criteria and comply with IRS regulations to obtain and maintain tax-exempt status. They are also required to file annual information returns (such as Form 990) with the IRS to report their financial activities and ensure ongoing compliance. State and local tax authorities may have additional requirements, so it’s crucial for non-profits to be aware of and fulfill all relevant obligations.

Are tax returns public record?

Yes, tax returns filed by non-profit organizations in the United States are generally considered public records. The Internal Revenue Service (IRS) makes these records available to the public, allowing individuals to access information about a non-profit’s finances, activities, and governance.

 

The most commonly filed form for non-profits is Form 990, which is an annual information return. Forms 990, 990-EZ, and 990-PF are typically available for public inspection, and individuals can access them through various means, including:

 

IRS Website

The IRS provides a platform called “Exempt Organizations Select Check” on its website where users can search for and view electronic copies of Forms 990 for tax-exempt organizations.

 

Non-Profit’s Website:

Many non-profit organizations choose to make their tax returns readily accessible on their own websites. This can enhance transparency and make it easier for the public to access this information.

 

Third-Party Websites

Some organizations and websites, such as GuideStar, may compile and provide access to non-profit tax filings. These platforms aggregate information from various sources, including the IRS, and make it available to the public.

 

The availability of specific information can depend on the type of non-profit organization and its size. Larger organizations filing Form 990 or 990-EZ are required to provide more detailed financial information, which is then made available to the public.

 

This transparency is intended to help donors, researchers, and the general public evaluate the financial health, activities, and governance of non-profit organizations. It’s important to note that while most information on Forms 990 is public, certain details, such as the names of donors, are redacted to protect privacy.

Are officers’ and employees’ salaries part of public records?

Yes, the salaries of non-profit workers and directors are generally made public through the filing of Form 990, which is an annual information return that non-profit organizations in the United States are required to submit to the Internal Revenue Service (IRS). Form 990 includes details about the compensation of key employees, officers, and directors.

 

Key points regarding the public disclosure of salaries through Form 990 include:

 

Compensation Reporting

Non-profits are required to report the total compensation (including salary, bonuses, and other forms of compensation) of certain individuals, including officers, directors, trustees, and highly compensated employees.

 

Public Availability

Form 990 is a public document, and the IRS makes it available for public inspection. Additionally, many non-profit organizations choose to make their Form 990 readily accessible on their own websites.

 

GuideStar and Other Platforms

Various third-party organizations and platforms, such as GuideStar, compile and provide access to non-profit tax filings, including salary information. These platforms aggregate data from multiple sources, including the IRS, to offer the public a comprehensive view of a non-profit organization’s financial information.

 

Privacy Considerations

While Form 990 provides transparency about salaries, it does not disclose the names of individual employees. Instead, it typically reports the positions or titles of the highest-paid employees and provides compensation figures in ranges. This is done to protect the privacy of individual employees. Current and former officers and key employees must report compensation if above $100,000.

 

Individuals, donors, researchers, and the general public can use Form 990 to review and analyze the financial aspects of non-profit organizations, including executive compensation. This transparency is intended to help stakeholders make informed decisions about supporting or engaging with a particular non-profit.

How does a non-profit find a CPA?

Finding a Certified Public Accountant (CPA) for a non-profit organization involves a process similar to that for any other type of organization. Here are steps you can take to find a CPA for your non-profit:

 

Ask for Recommendations:

Seek recommendations from other non-profit organizations: Reach out to other non-profits in your community or field of work and ask for recommendations. Word of mouth can be a valuable way to find a reliable CPA.

Check Professional Associations:

Consult the American Institute of CPAs (AICPA) website: The AICPA is a professional organization for accountants. Their website may have directories or tools to help you find CPAs in your area with experience in non-profit accounting.

State CPA Societies:

Explore your state’s CPA society: Many states have CPA societies that can provide directories of CPAs, including those with expertise in non-profit accounting. Check with your state’s society for assistance.

Online Platforms:

Use online platforms: Websites like LinkedIn, Indeed, or specialized platforms for accounting services may have profiles of CPAs with experience in non-profit accounting. Look for professionals with relevant experience and positive reviews.

Referrals from Other Professionals:

Ask your attorney, banker, or financial advisor: Professionals in related fields often have networks of trusted colleagues. Ask for referrals from your attorney, banker, or financial advisor, as they may know CPAs with expertise in non-profit accounting.

Non-Profit Networks:

Utilize non-profit networks: Organizations like the National Council of Nonprofits or local non-profit associations may have resources or recommendations for CPAs familiar with the unique accounting needs of non-profits.

Interview Candidates:

Once you have a list of potential candidates, conduct interviews to assess their understanding of non-profit accounting, relevant experience, and their ability to meet your organization’s specific needs.

Check References:

Ask for references: Request references from other non-profits or clients they have worked with. This can provide insights into their performance and reliability.

Consider Specialized Expertise:

Look for expertise in non-profit accounting: Non-profit accounting has unique requirements, including compliance with tax laws and reporting standards specific to non-profits. Seek a CPA with experience in this area.

Discuss Fees and Services:

Clearly discuss fees and services: Ensure that you have a clear understanding of the fees involved and the services the CPA will provide. Discuss any additional services you may need beyond standard tax preparation and financial statement preparation.

By following these steps and conducting thorough research, you can find a CPA who is well-suited to meet the accounting needs of your non-profit organization.

The 990 and Schedules

 

 

A

 

The 990 Schedule A is a supplementary form that is part of the IRS Form 990 series. Form 990 is the annual information return that non-profit organizations in the United States are required to file with the Internal Revenue Service (IRS). Schedule A specifically focuses on reporting information related to the organization’s public charity status and various activities.

 

Here are some key points about the 990 Schedule A:

 

Purpose: The primary purpose of Schedule A is to gather detailed information about a non-profit organization’s public charity status, sources of support, and activities. It helps the IRS assess whether the organization meets the requirements to maintain its tax-exempt status.

 

Part I – Public Charity Status and Public Support:

Part I of Schedule A is used to determine if the organization qualifies as a public charity rather than a private foundation. It includes sections for reporting public support, government support, and other types of support.

Part II – Conservation Easements:

Part II focuses on organizations that hold conservation easements. It gathers information about these easements and the non-profit’s involvement in land conservation efforts.

Part III – Organizations Maintaining Collections of Art, Historical Treasures, or Other Similar Assets:

This part of Schedule A is relevant for organizations that maintain collections of art, historical treasures, or other similar assets. It requires information about the organization’s collections, including how they are used and cared for.

Part IV – Reasonable Cause Explanation for Part VI-A Failures:

Part IV is used if the organization did not meet the public support test on Part VI-A and is providing an explanation or demonstrating reasonable cause for not meeting the test.

Part V – Statements Regarding Other IRS Filings and Tax Compliance:

Part V requires the organization to provide information about its compliance with other IRS filings and tax-related matters.

Part VI – Governance:

Part VI collects information about the organization’s governance and policies, including whether it has adopted certain policies recommended by the IRS.

It’s important for non-profit organizations to complete Schedule A accurately and thoroughly as part of their Form 990 filing. The information provided on Schedule A contributes to the overall understanding of the organization’s activities, governance, and compliance with IRS regulations. Additionally, Schedule A is available for public inspection, adding to the transparency of the non-profit sector.

 

B

Schedule B specifically focuses on reporting information about donors who contribute a certain amount to the non-profit organization during the tax year.

 

Here are key points about the 990 Schedule B:

 

Purpose

The primary purpose of Schedule B is to provide the IRS with information about significant donors to the non-profit organization. This information helps the IRS monitor compliance with tax regulations and ensures transparency in the non-profit sector.

 

Donor Reporting Threshold

Schedule B generally requires reporting of donors who contribute more than a certain threshold amount during the tax year. The threshold varies depending on the size of the organization and can change over time. Organizations should refer to the specific instructions for the applicable tax year.

 

Reporting of Contributions

For each donor meeting the reporting threshold, Schedule B typically requires the disclosure of the donor’s name, address, and the amount contributed during the tax year. It is important to note that individual donor names and addresses are considered confidential and are not disclosed to the public on the version of Form 990 that is publicly available.

 

Public Inspection

While the names and addresses of donors are not made public on the version of Form 990 available for public inspection, other information about contributions and grants received is generally disclosed in the main body of Form 990. Non-profit organizations should be aware of the balance between donor privacy and transparency in complying with reporting requirements.

 

Exception for Section 501(c)(3) Organizations

Organizations exempt under section 501(c)(3) of the Internal Revenue Code, which includes many charitable and educational organizations, are generally required to provide names and addresses of donors on Schedule B. Other types of non-profits may not be required to provide this information.

 

 

D

Specifically, Schedule D is used to report information about the organization’s financial statements and other financial activities. It provides details on various aspects of the organization’s financial condition, including assets, liabilities, revenue, and expenses.

 

Key points about the 990 Schedule D include:

 

Purpose

Schedule D is designed to capture information about the organization’s financial position and changes in its net assets. It provides a detailed breakdown of the organization’s assets and liabilities, as well as information on certain financial transactions.

 

Sections of Schedule D:

Part I – Supplemental Financial Statements: This part includes information about the organization’s financial statements, including its balance sheet, statement of activities, and reconciliation of net assets.

 

Part II – Conservation Easements: If the organization holds a qualified conservation contribution or a conservation easement, this part is used to provide details about those transactions.

 

Part III – Organizations Maintaining Collections of Art, Historical Treasures, or Other Similar Assets: This part is relevant for organizations that maintain collections of art, historical treasures, or other similar assets. It requires information about the organization’s collections, including how they are used and cared for.

F

Schedule F is used to report information about various types of activities and expenditures that may raise concerns about the organization’s compliance with tax laws. It focuses on activities that could be considered risky or could potentially affect the organization’s tax-exempt status.

 

Here are key points about the 990 Schedule F:

 

Purpose

Schedule F is designed to capture information related to certain activities that might pose compliance risks for a non-profit organization. It helps the Internal Revenue Service (IRS) assess whether the organization is adhering to tax regulations and maintaining its tax-exempt status.

 

Sections of Schedule F:

 

Part I – Political Campaign and Lobbying Activities: This part addresses the organization’s involvement in political campaign activities and lobbying efforts. Non-profit organizations are generally subject to restrictions regarding political and lobbying activities to maintain their tax-exempt status.

 

Part II – Grants and Other Assistance to Domestic Individuals: This part focuses on grants or assistance provided to individuals within the United States. It aims to ensure that the organization’s activities align with its tax-exempt purpose and are consistent with tax regulations.

 

Part III – Grants and Other Assistance to Domestic Organizations and Domestic Governments: This section addresses grants or assistance provided to other organizations or government entities within the United States.

 

Part IV – Grants and Other Assistance to Foreign Individuals, Governments, and Organizations: This part pertains to grants or assistance provided to individuals, governments, or organizations outside the United States.

 

 

G

Schedule G is used to provide additional information about certain fundraising activities and gaming that may have tax implications. The purpose is to ensure transparency and compliance with tax regulations.

 

Here are key points about the 990 Schedule G:

 

Purpose

Schedule G is designed to capture information related to fundraising activities, particularly those involving contributions, special events, and gaming. It provides details about how the organization conducts and reports on these activities.

 

Sections of Schedule G:

 

Part I – Fundraising Activities: This part addresses the organization’s fundraising activities and the various methods used to solicit contributions. It provides details about fundraising events, such as auctions, charity dinners, and similar activities.

 

Part II – Gaming: This section focuses on gaming activities, such as bingo, pull-tabs, raffles, and other games of chance. Non-profit organizations may engage in gaming as a fundraising method, but there are specific regulations and reporting requirements associated with such activities.

 

 

H

Schedule H is specifically used by tax-exempt hospitals to report information related to community benefit activities and other activities required for compliance with tax regulations.

 

Here are key points about the 990 Schedule H:

 

Purpose:

Schedule H is designed to capture detailed information about the community benefit activities and other activities of tax-exempt hospitals. The goal is to ensure transparency and accountability regarding the provision of community benefits by these hospitals in exchange for their tax-exempt status.

 

Sections of Schedule H:

 

Part I – Hospitals: This part includes general information about the hospital, such as its name, EIN (Employer Identification Number), address, and details about its tax-exempt status.

 

Part II – Narrative Description of Community Benefit Activities: Tax-exempt hospitals are required to provide a narrative description of their community benefit activities. This includes information about the types of programs and services provided to the community, how these activities address community health needs, and the populations served.

 

Part III – Supplemental Information on Community Benefit Activities: This part provides additional details about various community benefit activities, such as charity care, Medicaid shortfall, community health improvement services, and health professionals education.

 

Part IV – Other Information Required for Schedule H: This part covers additional information required for compliance with tax regulations, including information about bad debt expenses, Medicare/Medicaid reimbursement policies, and executive compensation.

I

Schedule I is used to report information about grants and other assistance made by the organization to domestic individuals, domestic organizations, and domestic governments.

 

Here are key points about the 990 Schedule I:

 

Purpose

The primary purpose of Schedule I is to capture detailed information about the grants and other assistance provided by the non-profit organization to individuals, organizations, and governments within the United States. This information contributes to the overall transparency of the organization’s financial activities.

 

Sections of Schedule I:

 

Part I – Grants and Other Assistance to Domestic Individuals: This part focuses on reporting information about grants or assistance provided to individuals within the United States. It includes details such as the purpose of the grants, the type of assistance provided, and the amount of each grant.

 

Part II – Grants and Other Assistance to Domestic Organizations and Domestic Governments: This section addresses grants or assistance provided to other organizations and government entities within the United States. It includes information about the purpose of the grants, the type of assistance, and the amounts.

 

J

 

Schedule J is used to report compensation information for certain individuals, particularly key employees and highly compensated employees, within the organization.

 

Here are key points about the 990 Schedule J:

 

Purpose

Schedule J is designed to capture detailed information about the compensation of key employees and highly compensated employees in the non-profit organization. This information contributes to transparency and ensures that the organization complies with regulations related to executive compensation.

 

Sections of Schedule J:

 

Part I – Compensation Information for Certain Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees: This part requires reporting detailed information about the compensation of individuals such as officers, directors, trustees, key employees, and the highest compensated employees. Information includes base salary, bonus and incentive compensation, other reportable compensation, retirement and other deferred compensation, and non-taxable benefits.

 

Part II – Compensation Information for Certain Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees Listed on Form 990, Part VII, Section A, Line 1c: This part is used if the organization had individuals listed on Form 990, Part VII, Section A, Line 1c. It provides additional compensation details for these individuals.

 

L

Schedule L is used to provide additional information about transactions with interested persons, commonly known as “related-party transactions.”

 

Here are key points about the 990 Schedule L:

 

Purpose

The primary purpose of Schedule L is to report transactions and relationships between the non-profit organization and certain individuals or entities with a close relationship to the organization. These individuals or entities are often referred to as “interested persons.”

 

Sections of Schedule L:

 

Part I – Transactions with Interested Persons: This part requires the organization to report information about transactions with interested persons, including officers, directors, trustees, key employees, and certain family members. It includes details about the type of transaction, the amount involved, and any other relevant information.

 

Part II – Compensation Information for Certain Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees: Similar to Schedule J, Part II of Schedule L may provide additional compensation information for certain individuals listed on Form 990, Part VII, Section A, Line 1c.

 

Part III – Compensation Information for Certain Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees Listed on Form 990, Part VII, Section B, Line 5: This part is used if the organization had individuals listed on Form 990, Part VII, Section B, Line 5. It provides additional compensation details for these individuals.

N

Schedule N is used to provide additional information about liquidation, termination, dissolution, or significant disposition of assets during the tax year.

 

Here are key points about the 990 Schedule N:

 

Purpose

The primary purpose of Schedule N is to report information about significant changes in the organization’s structure or operations, specifically related to liquidation, termination, dissolution, or significant disposition of assets.

 

Sections of Schedule N:

 

Part I – Liquidation, Termination, Dissolution, or Significant Disposition of Assets: This part requires the organization to provide details about any significant changes in its structure or operations during the tax year. This includes information about the reason for the change, the assets involved, and the financial and non-financial aspects of the transaction.

 

Part II – Continuation Sheet: Additional information can be provided on a continuation sheet if more space is needed to fully explain the liquidation, termination, dissolution, or significant disposition of assets.

O

Schedule O is used to provide additional information that may be necessary for a complete understanding of the information reported on Form 990.

 

Here are key points about the 990 Schedule O:

 

Purpose

The primary purpose of Schedule O is to offer non-profit organizations the opportunity to provide additional context, explanations, and details regarding various aspects of their operations. It serves as a supplement to Form 990 and allows organizations to provide narrative explanations that enhance the understanding of the information reported on the main form.

 

Sections of Schedule O:

 

Part I – Supplemental Information to Form 990 or 990-EZ: This part provides space for organizations to provide additional information that is not captured elsewhere on Form 990 or 990-EZ. Organizations can use this section to explain specific entries on the main form, elaborate on program accomplishments, and provide additional context related to various aspects of their operations.

 

Part II – Conservation Easements: If the organization has entered into a qualified conservation contribution or a conservation easement, this part is used to provide details about those transactions.

 

Part III – Policies Regarding Governance and Management: This part allows organizations to describe their policies related to governance, management, and the review of the Form 990.

 

Part IV – Supplemental Information for Organizations That Complete Form 990-EZ: If the organization completes Form 990-EZ, this part provides additional space to include information that is not covered by the shorter form.

990T

Form 990-T is a tax form used by tax-exempt organizations, including non-profit organizations, trusts, and certain other entities, to report unrelated business income (UBI) and calculate any related income tax liability. Unrelated business income is income generated by a tax-exempt organization from an activity that is not substantially related to its exempt purpose.

 

Here are key points about Form 990-T:

 

Purpose

The primary purpose of Form 990-T is to report income from activities that are unrelated to the tax-exempt organization’s main purpose. Generally, tax-exempt organizations are not subject to federal income tax on income related to their exempt purpose, but they may be liable for tax on unrelated business income.

 

Unrelated Business Income (UBI)

UBI is income derived from a trade or business that is regularly carried on and is not substantially related to the organization’s exempt purpose. Common examples include income from advertising, rental of real property, and certain business activities.

 

Calculation of Tax Liability

Form 990-T is used to calculate the income tax owed on the unrelated business income. The tax rates applicable to tax-exempt organizations may differ from those for regular corporations, and certain deductions may apply.

 

Filing Requirements

Tax-exempt organizations are generally required to file Form 990-T if they have gross income of $1,000 or more from an unrelated trade or business during the tax year.

 

Exclusions and Deductions

Some types of income may be excluded from UBI, and certain deductions may be applicable. Organizations should carefully review the instructions and guidance provided by the IRS.

 

Tax Credits

In some cases, tax-exempt organizations may be eligible for certain tax credits that can be applied against their unrelated business income tax liability.

 

Filing Deadline

The filing deadline for Form 990-T is the same as for other tax-exempt organizations. Generally, it is the 15th day of the fifth month after the end of the organization’s tax year.

 

It’s important for tax-exempt organizations engaging in unrelated business activities to understand their reporting requirements and obligations related to Form 990-T. The IRS provides detailed instructions for completing the form, and organizations may also seek guidance from tax professionals to ensure compliance with tax laws.

Steps in filing taxes for a Not-for-Profit

Filing Form 990 involves several steps to ensure accurate and timely reporting for a tax-exempt organization. Here is a general overview of the steps to file Form 990:

 

Determine the Correct Form:

Identify the correct version of Form 990 based on the size and type of your organization. The most commonly used forms are Form 990, Form 990-EZ, and Form 990-N.

 

Gather Necessary Information:

Collect all relevant financial and organizational information, including details about the organization’s activities, revenue, expenses, assets, liabilities, and key personnel.

 

Review Instructions:

Thoroughly review the instructions provided by the IRS for the specific form you are filing. The instructions provide guidance on completing each section of the form and include important information about reporting requirements.

 

Complete the Form:

Fill out the required sections of the form accurately and completely. Pay special attention to schedules and additional forms that may be required based on the organization’s activities.

 

Attach Schedules and Additional Forms:

If your organization is required to complete any schedules or additional forms (such as Schedule A, Schedule B, etc.), ensure that these are completed and attached to the main form.

 

Check for Accuracy:

Double-check all entries for accuracy and completeness. Errors or omissions could lead to delays or compliance issues.

 

Calculate and Enter Financial Figures:

Calculate financial figures accurately, including revenue, expenses, and other financial metrics. Enter these figures in the appropriate sections of the form.

 

Provide Required Disclosures:

Ensure that the organization provides any required disclosures, including details about related-party transactions, compensation of key individuals, and other relevant information.

 

Prepare Supporting Documents:

Gather supporting documents such as financial statements, balance sheets, and any other documentation that supports the information reported on Form 990.

 

Review Governance and Compliance Policies:

If applicable, review and report on the organization’s governance and compliance policies in the designated sections of the form.

 

Calculate and Pay Any Tax Liability:

If your organization has unrelated business income subject to tax, calculate the tax liability and be prepared to pay any taxes owed.

 

File Electronically:

 

File electronically using the IRS’s e-File system if eligible. Alternatively, if filing by mail, ensure that the form is postmarked by the due date.

 

Keep a Copy for Records:

Retain a copy of the completed Form 990, along with all supporting documents, for the organization’s records. The IRS may request additional information in the future, so maintaining organized records is important.

 

Ensure Compliance with State Filing Requirements:

Be aware of any additional filing requirements imposed by state authorities. Many states require non-profit organizations to file annual reports or similar documents.

 

Stay Informed:

Stay informed about changes in tax laws and reporting requirements. Periodically check the IRS website for updates and new guidance.

It’s important to note that the specific steps may vary based on the type and size of the organization, as well as any changes in tax laws or reporting requirements. Consulting with a tax professional or accountant with experience in non-profit tax matters can be beneficial to ensure compliance and accuracy in the filing process.

If you are seeking a CPA that is well versed in the operations of Not-for-Profit, contact us now.

This is a list of some of the types of non-profits we service:

Humane Societies

Veterans Services

Cultural Organizations

Children’s Assistance

Overseas Projects

Disabled Causes

Disaster Victims

Victims 0f Abuse

Women’s charities

Health and Welfare

General Business

These are links to our posts on various non-profit types:

Humane Societies

Veterans Services

Cultural Organizations

Children’s Assistance

Overseas Projects

Disabled Causes

Disaster Victims

Victims 0f Abuse

Women’s charities

Health and Welfare

General Business

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