Article Highlights:
- Annual Filing Requirements
- Understanding Which Form to File
- Due Dates and Extensions
- Online Filing Options
- Consequences of Late Filing or Non-Filing
- Monetary Penalties for Filing Non-Compliance
- Other Considerations
- Staying Informed and Compliant
Navigating the maze of return filing requirements for tax-exempt organizations can appear difficult at first glance. However, understanding these standards is critical for maintaining your organization's tax-exempt status and ensuring IRS compliance. This detailed guide will walk you through the numerous forms that may need to be filed, including their unique needs, due dates, online filing alternatives, and the implications of filing late or not at all. By the end of this post, you'll have a better grasp of the process and how to navigate it successfully.
Annual Filing Requirements
Tax-exempt organizations must file an annual information return or notification with the IRS, unless an exception applies. Religious groups, church-affiliated schools at the collegiate level, and certain political parties are exempt from filing the yearly forms. The key forms involved are Forms 990, 990-EZ, 990-PF, 990-BL, and 990-N (e-Postcard). Your organization's financial activity, assets, and nature will determine which form it must file.
Understanding Which Form to File
- Form 990 - Required for companies with gross sales of $200,000 or more, or total assets of $500,000 or more, Form 990, the "Return of Organization Exempt from Income Tax," Some other businesses, such those running medical facilities or funding donor-advised funds, also need it.
- Form 990-EZ - For organizations with yearly gross revenues under $200,000 and total assets at the end of the tax year under $500,000, this is the "Short Form Return of Organization Exempt from Income Tax."
- Form 990-N (e-Postcard) - Usually $50,000 or less, small businesses with yearly gross income may submit Form 990-N, a simple electronic notification. Some companies, despite their tiny size, must file Form 990 or 990-EZ instead, however.
- Form 990-PF - Every private foundation, no matter its income or assets, has to submit Form 990-PF yearly. The "Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation" is this form.
- Form 990-BL- Is for black lung benefit trusts with gross income above $50,000. Those with gross revenues of $50,000 or less could submit Form 990-N.
Due Dates and Extensions
These papers are due on the 15th day of the fifth month after the close of an organization's tax year. Your filing date is May 15 of the following year, for example, if your tax year ends on December 31. Using Form 8868, organizations may ask for an automatic six-month extension.
Online Filing Options
The IRS encourages electronic filing for its convenience and efficiency. Forms 990, 990-EZ, and 990-PF must be e-filed. Form 990-N must be filed online using the Form 990-N Electronic Filing System (e-Postcard). The IRS provides resources and links for online filing on its website.
Consequences of Late Filing or Non-Filing
Not submitting the necessary paperwork for three straight years will automatically revoke your tax-exempt status. This is a major punishment that might influence an organization's contributions and activities.
Monetary Penalties for Filing Non-Compliance
Under some conditions, tax-exempt entities face financial penalties for failing to submit their mandated yearly reports or notifications or for submitting them late. The amounts shown here are for returns due in 2025; penalty amounts may be changed yearly to account for inflation. The following are the penalties and circumstances under which they apply:
- Late Filing of the Return - With a maximum penalty for any one return of $63,500, organizations with yearly gross sales above $1,274,000 face a $125 penalty for every day the failure to file persists. From the day following the return's due date until the return is submitted, this penalty applies.
- Failure to File Electronically - Organizations exempt from taxes that are supposed to file online but do not are considered to have not filed the return even if a paper return is sent. This is seen as a filing failure.
- Incomplete or Incorrect Filing - Penalties may also follow from an organization's incomplete return, such as by omitting a necessary line item or schedule element or by providing erroneous information.
- Responsible Person(s) Penalty - If the organization doesn't file a complete return or doesn't furnish correct information and fails to comply within a fixed time after the IRS sends a letter, a penalty of $10 a day can be charged to the person responsible, with a maximum penalty of $6,000 for any one return.
- Disclosure Requirements - Organizations exempt from filing mandated disclosures are liable to a nondisclosure fine of $125 for every day the failure persists, with a maximum penalty for any one disclosure of $63,500. The penalty is $125 for each day beyond the date indicated by the IRS until disclosure is made if the IRS issues a written demand for disclosure and the organization does not follow the instructions. The maximum penalty for any one revelation is $12,500.
These fines underline the need of tax-exempt entities submitting their necessary forms and notifications on time and precisely to prevent financial penalties and other repercussions including the loss of tax-exempt status.
Other Considerations
Apart from the main types, tax-exempt entities might have to submit other forms depending on their activity. For example:
- Employee Payroll Forms - Employers utilize Form 941, the Employer's Quarterly Federal Tax Return, to report to the IRS wages given to workers, federal income tax withheld from employees, both the employer's and employees' portion of Social Security and Medicare taxes, and extra Medicare Tax deducted from employees.
Unless they submitted a final return, got an IRS notice saying they qualify to file Form 944 (an annual return), or satisfy other exclusions, employers had to file Form 941 quarterly despite without taxes to declare. This form guarantees timely and correct reporting and payment of employment taxes. - Unrelated Business Income - Organizations exempt from taxes having gross revenue from an unrelated business of $1,000 or more must submit Form 990-T, Exempt Organization Business revenue Tax Return, and may owe unrelated business income tax (UBIT) on such income.
Except as a way of generating money, Unrelated Business revenue (UBI) is the revenue produced by any trade or business habitually undertaken by an exempt organization that is not closely related to the accomplishment of the tax-exempt purpose or function of the organization. Tax-exempt organisations need the idea of UBI as it defines the degree to which these entities may conduct economic operations without compromising their tax-exempt status or generating tax obligations. - Employee Benefit Plan Reporting - If the exempt organization has an employee benefit plan, a series Form 5500 must be filed. The purpose of this form is to assure that employee benefit plans are operated and managed in accordance with certain prescribed standards. It must be electronically filed and is due by the last day of the seventh month after the plan year ends, or typically July 31 for a calendar-year plan. A filing extension of 2½ months is available by filing Form 5558 prior to the due date deadline. Form 5558 may be paper filed.
- State Filing Requirements - Additional filing requirements for states might change.
Staying Informed and Compliant
The IRS provides a lot of tools to assist tax-exempt entities remain compliant. Their Charities and Nonprofits page and the StayExempt.irs.gov website provide free e-newsletter, mini-courses, and interactive seminars to keep you updated on the newest information and criteria.
Maintaining your organization's compliance and tax-exempt status depends on filing requirements for tax-exempt organizations. You may negotiate the filing process more easily by knowing which forms relate to your company, following due dates, and using online filing choices. Avoiding fines and making sure your company continues to flourish depend on your knowledge and proactive approach in your filing duties.
Call this office with inquiries and for help fulfilling your exempt organizations filing criteria and steering clear of non-compliance concerns.
