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Nonprofit Tax Returns for the Tax Exempt – Perry & Associates

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Nonprofit Tax Returns? But I’m Tax Exempt!

Meet Mary. Mary does a lot of good for the community. In fact, Mary started a nonprofit organization recently helping single moms build marketable career skills, navigate parenthood and balance the demands of work and family life. Mary dutifully filed for her nonprofit tax-exempt (501(c)(3)) status two years ago and has been pouring all her energy into her charity since then. 

But what Mary doesn’t realize is that her nonprofit status is now in danger because she hasn’t filed an annual tax return for the organization in the past two years. But Mary thought that no taxes meant no tax returns. Unfortunately, that’s not the case! 

Most nonprofit organizations, though tax-exempt, are still required to file annual nonprofit tax returns. Not filing, or filing late, can result in penalties for your organization. Failing to file for more than three years in a row can result in the organization’s nonprofit status being revoked.

While these nonprofit tax returns don’t require any taxes to be administered, it is necessary that the organization’s financial affairs be visible to the public.

990 Nonprofit Tax Returns

Nonprofit tax returns, known as the 990, are public documents, and as such, care should be taken to prepare them timely and accurately. Nonprofit taxes can be fairly simple, or quite complex, depending on the size of the organization, nature of the business it conducts, and how much revenue it receives.

The 990 forms serve to allow the IRS and the general public to evaluate the entire mission and operations of the organization; it includes information on the programs, mission, and finances of the organization. Donors, particularly foundations and other grantmaking organizations, use the 990 to help make decisions on whether they should contribute funding to an organization based on the information in the nonprofit’s tax returns.

Does my organization have to file a 990? 

If you’re new to the nonprofit world, or your organization hasn’t filed before, nonprofit tax returns can be daunting. Tax professionals who are experienced with nonprofit organizations can help you figure out if and how you need to file. 

While the type of 990 forms may differ from one organization to another, these types of organizations must file:

  • Private foundations
  • Most tax-exempt organizations with gross receipts over $200,000 or with assets over $500,000
  • Organizations with gross receipts over $50,000 may file a 990 or 990 EZ
  • Organizations with gross receipts that are less than $50,000 MUST file a 990-N
  • Tax-exempt organizations that fall under 501©, 527, or 4947 (a)(1), or that are not exempt from filing

Tax-exempt organizations that do not have to file nonprofit tax returns:

  • Churches and most faith-based organizations (religious schools, missionary organizations)
  • Subsidiaries of other nonprofits, if there is a group return filed
  • State institutions
  • Government corporations

If you are unsure if your nonprofit needs to file, or if you are unsure of how to file a 990 or 990EZ, you should consult a professional tax preparer for help. 

Accountants for Nonprofits

Hiring a firm with a team of experienced tax experts can also help a nonprofit organization with other tax challenges:

  • Filing for tax-exempt status
  • Unrelated Business Income Tax
  • Multi-entity planning
  • State and local tax filing
  • Reviewing internet fundraising activities
  • Maintaining state charitable fundraising status
  • Reviews of sponsorship, affinity, and royalty contracts
  • IRS private ruling requests
  • Donations of property
  • Donations of vehicles
  • Donations of intellectual property
  • Donations of stock

If your nonprofit organization needs assistance with filing nonprofit tax returns or any other tax challenges, give us a call today at 740.373.0056.

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