As we’re all getting closer to our own tax filing deadline, nonprofit organizations have to give consideration to their own tax filings as well, May 15th is right around the corner!
That’s why I’m pleased to share a guest blog by James Gilmer, Harbor Compliance
A Primer and Pitfalls on IRS Form 990
One of the most important tasks for nonprofits, no matter their industry or purpose, is the annual IRS 990 return. For new nonprofit founders, this requirement may come as a surprise, but it is absolutely essential to keeping your 501(c)(3) tax exemption.
What is Form 990?
Form 990 is a tax return filed with the IRS. On it, you will update the IRS with all aspects of your organization, including information on your mission and programs, revenue and expenses, and leadership.
There are actually several versions of Form 990, and the one you file depends on your nonprofit’s revenue, or if it is classified as a Private Foundation. With few exceptions, most organizations will file one of these forms.
When is Form 990 due?
The IRS requires that you file Form 990 four months and fifteen days after the end of each fiscal year. That means if you close your books December 31, your 990 is due before May 15th. If you need more time, you can file with the IRS for a three- or six-month extension.
What if I don’t file my 990?
If you don’t file your 990 for three consecutive years, the IRS will revoke your hard-earned federal tax exemption. That does not mean you should skip two years, either. Many states require you to submit your 990 annually, and donors and foundations may request this document at any time. If you can’t present your 990 return, you may be in violation of the law, and may lose critical sources of funding.
What are some pitfalls of the 990?
Filing a 990 is annual requirement that is essential to keeping your organization in compliance. Here are a few things to watch out for:
Many organizations need help in preparing complex financial statements. In those cases, it is best to find a CPA or accountant that specializes in nonprofit tax filings. Large organizations typically need a financial audit as well, and many firms prepare both audited financials and IRS Form 990.
Small organizations, typically those in their first year, have an easier time. IRS 990-N is an online postcard that is usually completed in under 30 minutes. That particular version does not ask for any complex financial information.
If you incorporated your nonprofit in the previous calendar year, for example in November, but you have not received your 501(c)(3) status, you are still required to file a 990 before the May 15th deadline. Failure to file a 990 return in that first year can jeopardize your organization even getting its federal tax exemption.
Lastly, it may seem silly, but make a note on your calendar. If you run a small organization, you probably have enough to do, but do what works for you so that your 990 filing doesn’t fall through the cracks.
And remember, May 15th, 2016 is fast approaching – be sure to submit your 990 on time!
Author Bio: James Gilmer is a compliance specialist for Harbor Compliance, which establishes 501(c) nonprofits and helps them stay compliant. Harbor Compliance assists charities in every state and several countries abroad. James serves on the Board for two nonprofits in Lancaster, Pennsylvania.
Thank you James!
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