Although tax-exempt organizations are exempt from paying income taxes, they are required to file an annual income tax return in order to maintain tax-exempt status.That tax return is known as Form 990.
Who is required to file Form 990?
The requirement to file Form 990 comes to us from section 6033(a)(1) of the Internal Revenue Code, which states,“Except as provided in paragraph (3), every organization exempt from taxation under section 501(a) shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws…”
Therefore, if you operate any kind of ministry (excluding churches) or regular nonprofit organization then you must file Form 990 on an annual basis. This includes, but is not limited to, organizations such as community development corporations (CDCs), traveling evangelistic ministries, transitional housing programs, holdings corporations, and many more.
What happens if I miss the deadline?
When we take a further look at section 6033, we see that section 6033(j)(1) states thatorganizations that fail to file Form 990 for three consecutive years will receive an automatic revocation of their tax-exempt status.
Now, perhaps you are in the situation in which you have obtained an employer identification number (EIN or Tax ID) and have even incorporated your ministry/organization in your state, but have yet to get 501(c)(3) status. Does this mean that you do not yet have to file Form 990? Absolutely not! The “time clock” for you to begin filing Form 990 begins when you first obtain the EIN for your ministry/organization.
Many ministries lose their 501(c)(3) each year
There is a misunderstanding among many as to when an organization is required to file tax return 990. A ministry is required to file a 990 for the year in which it get its tax ID number (FEIN). However, many organizations believe that they are not required to file until they get their 501(c)(3) status. Let me give you an example. Pastor X started a CDC to reach out to the community. He incorporated the CDC and got the tax ID number in 2011. However, the CDC did not really start to pick up speed until 2013, at which point he decided that the CDC was doing well enough to merit obtaining 501(c)(3) status. He submitted the application, and it got approved. In June of 2014, however, he received a letter from the IRS stating that the newly approved CDC had been revoked. As upsetting as this was, it happened because in the IRS computer system his ministry went three consecutive years without submitting a 990 tax return. The IRS system expected a 990 for tax years 2011, 2012, and 2013.
Determine which form and know when to file
You do not have to be caught off guard with an automatic revocation. You can, however, be equipped to handle the Form 990 filing requirements successfully and protect your non-profit’s tax-exempt status by using the following guidelines.
- Determine if your organization is required to file Form 990. Remember, churches do NOT have to file 990 tax returns. However, all Christian, non-church (para-church) ministries are required. Private foundations are always required to file a particular 990 specifically for private foundations no matter how much they receive in donations.
- Determine what type of 990 you are responsible for filing. There are several variations for the Form 990 annual informational return. They are listed below:
- 990N (the e-Postcard): A 990N is an electronic notice. Organizations with gross receipts of normally $50,000 or less will file this electronic notice.
- Form 990 EZ: Form 990EZ is also referred to as the short form. Organizations with gross receipts of normally more than $50,000 but less than $200,000, and whose assets are valued at less than $500,000, are required to file this form.
- Form 990, also know as the long form: Organizations whose gross receipts are on average $200,000 or greater, and whose assets are valued at $500,000 or greater, are required to file Form 990.
- Know your deadline for filing Form 990. All 990 filers are required to submit their returns by the 15th day of the 5th month of their fiscal year. For most organizations, their fiscal year coincides with the calendar year (January – December). If your fiscal year ends on December 31st, then your Form 990 will be due by this coming Friday, May 15th. If your fiscal year ends June 30th then you will be required to file your Form 990 by November 15th of the same year.