Nonprofits with a 501(c)(3) status don't have to pay federal or most state taxes. But, they must file an annual return with the IRS using Form 990 to keep their tax-exempt status. This guide will explain the purpose and importance of Form 990. It will also cover the steps to file it correctly. This info ensures your nonprofit follows the rules and is open about its finances.
Form 990 is an annual tax return that nonprofits must file with the IRS. It helps the IRS check if the organization is a real nonprofit and uses its funds right. This is key to keeping its tax-exempt status. Also, it makes the organization's finances open to the public, letting people see how it's doing.
Nonprofits must file Form 990 every year to keep their tax-exempt status. Not filing for three years in a row can lead to losing tax-exempt status. This means they have to reapply and pay more fees to get it back. On time and accurate filing shows the IRS the nonprofit is doing well and managing money right.
Not-for-profits must share Form 990 with the public, as per Sec. 6104(b). The IRS plans to make Forms 990 easier to find online. Not-for-profits must also include detailed sections on their Form 990, making it easy for donors to understand. CPAs help write these sections to tell the organization's story clearly.
The IRS Form 990 is key for research and decisions by media, donors, board members, and other nonprofits. Accurate and open Form 990 filing helps nonprofits keep their tax-exempt status and build trust with stakeholders.
Nonprofits in the U.S. must file certain versions of Form 990 based on their income and assets. There are four main types: Form 990-N (e-Postcard), Form 990-EZ, the full Form 990, and Form 990-PF for private foundations.
Organizations with less than $50,000 in income can file the Form 990-N (e-Postcard). Those with income between $50,000 and $200,000, and assets under $500,000, can choose the Form 990-EZ. Nonprofits with more than $200,000 in income or over $500,000 in assets must file the full Form 990. Private foundations, no matter their size, must file the 13-page Form 990-PF.
The type of Form 990 a nonprofit must file depends on its income and assets. If a nonprofit has less than $200,000 in income and less than $500,000 in assets, it can file a shorter Form 990. Nonprofits with $200,000 or more in income or $500,000 or more in assets must file the full Form 990 every year.
Keeping detailed records and not waiting too long are good tips for filing taxes smoothly. Getting help from others, hiring consultants or accountants, or using software can make filing taxes easier. Using software like File 990 can help small to mid-sized nonprofits file Form 990-N or 990-EZ faster and cheaper.
Filing Form 990 on time is key for nonprofits to keep their tax-exempt status and be open about their finances. They must file it online by May 15, five months after their fiscal year ends, if it's a calendar year. If they need more time, they can file Form 8868 for a 6-month extension. Also, Form 990s must be public for three years after filing, so people can see how the money is used.
What version of Form 990 you need depends on your income and assets. Small nonprofits with less than $50,000 in income use Form 990-N, also called the e-Postcard. Medium-sized groups with less than $200,000 in income and assets under $500,000 use Form 990-EZ. Big nonprofits and all private foundations use the standard Form 990 or Form 990-PF, no matter their size.
If you don't file Form 990 on time, you could face big problems. You might lose your tax-exempt status, can't accept donations, and get fined $20 to $100 a day. If you make over $1 million, the fine is $100 a day. To avoid these issues, keep good records all year and think about hiring a pro to help with the Form 990.