By Bo Garner, CPA, MBA

As the May 15th deadline approaches, most tax-exempt organizations operating on a calendar year-end (December 31) must prepare to submit their Form 990-series returns or request an extension. Meeting this deadline is crucial for maintaining tax-exempt status and ensuring compliance with IRS regulations.

Understanding the Form 990-Series

The Form 990-series is a collection of forms designed to meet the reporting needs of tax-exempt organizations of various sizes and types. These forms play a crucial role in maintaining compliance with IRS regulations, ensuring that organizations provide necessary transparency about their operations in alignment with their capabilities and legal obligations.

  • Form 990: Often referred to as the “Return of Organization Exempt from Income Tax,” this form is the most comprehensive of the series. It is required from medium to large tax-exempt organizations and provides a detailed view of their financial activities, governance, and operational effectiveness, thereby enhancing transparency and building public trust.
  • Form 990-EZ: A simplified version of the Form 990, it is designed for organizations with gross receipts less than $200,000 and total assets less than $500,000 at the end of the year. This form makes compliance more accessible to smaller organizations while still ensuring significant transparency.
  • Form 990-PF: Specifically used by private foundations, regardless of their size. It includes detailed information about financial activities, donors, and grants, helping to monitor the flow of funds and the foundation’s adherence to its purpose and regulatory obligations.
  • Form 990-N (e-postcard): Designed for small tax-exempt organizations with gross receipts of $50,000 or less. This form simplifies the reporting process to the bare essentials, facilitating compliance for organizations with minimal financial activity.
  • Form 990-T: Filed by organizations that generate income from business activities unrelated to their exempt purpose. This form ensures that tax-exempt entities are accurately reporting and potentially paying tax on income that does not align directly with their primary mission.
  • Form 4720: Used for reporting certain excise taxes, often associated with private foundations and other specific taxable activities within the nonprofit sector.

The Importance of Timely and Accurate Filing

Filing Form 990 is a critical obligation for all nonprofits, serving several vital functions:

  • Enhancing Transparency: By disclosing financial and operational details to the public and stakeholders, Form 990 fosters trust and ensures that nonprofits operate within legal and ethical standards.
  • Ensuring Regulatory Compliance: The form provides crucial oversight tools for the government to verify adherence to the regulations necessary to maintain tax-exempt status.
  • Keeping Up with Tax Legislation: Regular filing keeps nonprofits informed about changes in tax laws, helping them stay compliant with current requirements.

Critical Reminder: Nonprofits must file Form 990 annually, regardless of tax obligations. Failing to file for three consecutive years results in automatic revocation of tax-exempt status.

Deadlines and Extensions: 

  • Annual Deadline: Organizations must file their Form 990 by May 15th if their fiscal year ends on December 31. For those with different fiscal year-ends, the deadline is the 15th day of the 5th month after the fiscal year concludes.
  • Consequences of Late Filing: Missing these deadlines can result in penalties and increased scrutiny, compromising the organization’s compliance status.
  • Extension Options: If organizations need additional time, they can request a six-month extension by filing Form 8868 before the original deadline. It’s important to note that this extension pertains only to the filing of the return, not to any due tax payments, which must be settled by the initial deadline to avoid penalties.

Potential Challenges

Submitting Form 990 can be daunting due to its complexity and the extensive financial information it requires. This form is essential for ensuring transparency and compliance, but preparing it involves a deep understanding of tax laws, careful data collection, and accurate reporting. Various challenges can complicate this process for many tax-exempt organizations:

  • Complexity and Detail: Understanding which form to file and gathering the comprehensive financial data required can be overwhelming, especially for smaller nonprofits with limited resources.
  • Maintaining Accurate Records: Accurate and complete record-keeping throughout the year is critical to provide the necessary information for Form 990. This involves detailed tracking of donations, expenses, and other financial transactions.
  • Public Disclosure: Form 990 is a public document. Organizations must be careful about the accuracy and the way information is presented since it reflects on their public image and can impact donor trust and confidence.

Additional Considerations

The IRS mandates electronic filing for most forms in the 990-series to enhance processing efficiency and accuracy. Failure to comply can result in the rejection of paper returns and potential penalties.

While all tax-exempt organizations are generally required to file, there are exceptions. Churches, most faith-based organizations, subsidiaries of other nonprofits, state institutions, and government corporations may be exempt. Always verify with the IRS or a tax advisor.

Form 990 FAQ

What happens if my Form 990 is missing information? 

Incomplete forms are returned for corrections, potentially leading to penalties.

Can I get an extension for filing Form 990, and does it extend my payment deadline as well? 

Extensions apply only to the filing of the return, not to any payments due.

Are there consequences for filing Form 990 late? 

Late filings incur penalties based on the organization’s size and the delay length.

How can organizations verify their filing status? 

Check with the IRS or review past filings to ensure all information is current and accurate.

As the May 15th deadline approaches, tax-exempt organizations must ensure their Form 990 filings are complete and accurate. For those needing assistance or additional guidance, contact PBMares Not-for-Profit Partner Bo Garner.