By now, most nonprofit executives are aware that if they fail to file a Form 990 for three years in a row, the organization’s tax-exempt status will be revoked. No ifs ands or buts or option to appeal. The revocation is automatic.
What some people don’t know is that a return is due even if the organization:
- was just formed and only had a short initial tax year;
- has not yet received recognition tax-exempt status from the IRS; and
- has had zero revenue for the year.
There are several different types of Form 990. Private Foundations file 990-PF. Other nonprofits file a Form 990, 990-EZ, or 990-N depending on their gross receipts and assets for the year in question as follows:
- Form 990N – Gross receipts normally less than $50,000
- Form 990-EZ – Gross receipts less than $200,000 and total assets less than $500,000
- Form 990 – Gross receipts greater than $200,000, or total assets greater than $500,000
Form 990, 990-EZ, or 990-PF must be filed by the 15th day of the 5th month after the end of the organization’s accounting period. That means, for a calendar year taxpayer, Form 990, 990-EZ, or 990-PF is due May 15 of the following year. The IRS has provided a helpful chart for nonprofits to determine their filing deadlines.
If the Form 990 is not ready, the organization should file an extension with the IRS by submitting “Form 8868, Application for Automatic Extension of Time to File An Exempt Organization Return.” The IRS now grants an automatic six (6) month extension but organizations must still file the form to take advantage of it.
For organizations that have a fiscal year which ends June 30th, September 30th and December 31st, May 15 is also an important date if the organization is registered to solicit in states that follow the IRS deadlines. Extensions may be requested with the states for organizations with a fiscal year end September 30th or December 31st. For organizations with a fiscal year end of June 30th, most states will expire, with no further extension, May 15. Prepare and submit the application(s) as soon as possible to avoid accruing late fees.
If the tax return is filed late, the IRS imposes late fees based on the organization’s gross receipts ($20 day per day for organization’s whose gross receipts are less than $1 million and $100 per day for organization’s whose gross receipts are more than $1 million). Failure to file Form 990 for three consecutive years will result in automatic loss of exemption.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.