While, in most cases, not-for-profits are exempt from paying income tax, the IRS requires that they still file a return.
Did you know the IRS requires that not-for-profit entities file a tax return? While, in most cases, not-for-profits are exempt from paying income tax, the IRS requires that they still file an “informational tax return” known as Form 990 “Return of Organization Exempt from Income Tax”. As not-for-profits are supported by the public and serve the public interest, the intention is that these documents be made available to the general public for purposes of transparency. Unlike your personal or business tax return, the endgame of compiling and reporting the information within the 990 is not to determine the amount of tax owed or refunded. Instead, the 990 exists to provide the IRS and the public with key information about the not-for-profit entity and its activities.
Key Information Contained in the 990
The core form 990 consists of Parts I-XII which span 12 pages. Included in these 12 pages the entity will provide information including, but not limited to, the following:
- Organizational information – mission, activities, members, and directors
- Financial information – balance sheet, profit and loss, sources of revenue, functional expenses, etc.
- Compensation of officers and directors
Throughout the 12 pages there are numerous yes/no questions that, depending on the responses, can trigger the need for additional schedules to the 990 to be completed and filed as well (there are a total of 16 potential schedules). A few of them are as follows:
- Schedule A – Public Charity Status and Public Support
- Schedule B – Schedule of Contributors
- Schedule C – Political Campaign and Lobbying Activities
- Schedule G – Supplemental Information Regarding Fundraising or Gaming Activities
- Schedule I – Grants and Other Assistance to Organizations, Governments, and Individuals in the United States
When Does the 990 Need to Be Filed?
The deadline for filing the 990 is the 15th day of the 5th month after the fiscal year end (i.e. – May 15 for December 31 year-ends). An extension can be filed that extends the deadline an additional 6 months (i.e. – November 15 for December 31 year-ends).
Other Variations of the Form 990
There could be some situations where your not-for-profit should be filing a different variation of the form 990:
- 990-EZ – The “Short Form Return of Organization Exempt from Income Tax” can be used for organizations with gross receipts less than $200,000 and total assets less than $500,000
- 990-N – Small organizations whose annual gross receipts are “normally $50,000 or less”
- 990-PF – For private foundations