The Nonprofit – What Is a 990 Annual Return and Who Must File?

The 990 tax form is the form tax-exempt organizations are required to file each year.  This form allows the IRS and the general public to analyze the operations of a nonprofit.  The form provides information on the nonprofit’s mission, programs, and finances.  The information on the 990 form allows potential donor’s, lending institutions, and individuals interested in supporting a specific cause make an informed decision about the charities they may want to support.   An organization can clearly state its mission on the 990, as well as emphasize its accomplishments of the previous year.  The form provides information on where the organization gets its revenue; a potential employee can find out how much a nonprofit pays its employees; potential board members can see who is on the board; the organization’s cash reserves are also available to be viewed.  

Because of all the information available to the public on this form, it is very important that nonprofits take their time in filling out their 990 with accurate information.  They should also be sure to file the return on time.  

When is the 990 Annual Return Due?

Form 990 is due on the 15th day of the fifth month after the fiscal or calendar year of the nonprofit.  For example, if a nonprofit is on a calendar year (meaning it’s year ends on December 31, of a given year), the organization’s 990 is due on May 15th of the following year.  If the organization’s year-end is on June 31, it’s 990 return is due on November 15, of the same year.  Two ninety-day extensions are allowed, except for 990-N (postcard) filers.

Why You Should File Your 990 Annual Return On Time

In 2006, The Pension Protection Act added a new law that provides for the automatic revocation of an organization’s exempt status if the organization fails to file a tax return for a consecutive three year period. The IRS enforced this law in 2011 when it published a list of 275,000 exempt organizations that lost their tax-exempt status after failing to file a form 990 for three consecutive years. In recent years, several nonprofits have lost their exempt status because they did not file a 990 as required.  Non-filers are often smaller nonprofits that made less than $50,000 in annual revenue and do not realize they are required to file a 990-N despite their low revenue.  

Who Should File a 990 Annual Return?

All private foundations, regardless of income, and most active nonprofits are required by law to file an annual return.  Private foundations must file a 990-F.   Which form an organization should file depends on its gross revenue and total assets.  

Churches and most faith-based organization’s (religious schools, missions, or missionary organization’s)  however, are exempt from this requirement and therefore, do not have to file an annual tax return but can if they choose to.   

If you are a subsidiary of a larger nonprofit, you do not have to file a 990 if the parent organization files a group annual return.

If you have created a corporation within the last 27 months (or some other entity type other than a corporation) with the intention of applying for nonprofit status with the IRS, you should file a form 990 even though you either have not yet applied for nonprofit status, or you have applied and are waiting for a determination from the IRS.  Either way, the IRS will allow you to claim tax-exempt status retroactively as long as the nonprofit was formed within 27 months of applying for tax-exempt status.

Even though tax-exempt organizations do not pay federal income tax on revenues derived from activities related to their purpose, the 990 form is used as a tool by the IRS to make sure that the tax-exempt organization is conducting its business in a way that is consistent with its tax-exempt purpose.

 

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