Generally, tax-exempt organizations must file an annual information return. Tax-exempt organizations that have annual gross receipts not normally in excess of $25,000 are not required to file the annual information return, but may be required to file an annual electronic notice (e-Postcard) Form 990-N. In addition, churches and certain religious organizations, certain state and local instrumentalities, and other organizations are excepted from the annual return filing requirement. For more information, download Publication 557, Tax-Exempt Status for Your Organization. In addition, Publications 4221-PC and 4221-PF explain the filing and recordkeeping rules that apply to section 501(c)(3) tax-exempt public charities and private foundations respectively.
Tax-exempt organizations, other than private foundations, must file Form 990, Return of Organization Exempt From Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax. The Form 990-EZ is designed for use by small tax-exempt organizations and nonexempt charitable trusts. An organization may file Form 990-EZ, instead of Form 990, only if it satisfies thresholds relating to its gross receipts during the year and its total assets (as shown in the balance sheet of Form 990-EZ) at the end of the year. If your organization fails to meet either of these conditions, you cannot file Form 990-EZ. Instead you must file Form 990. All private foundations exempt under 501(c)(3) must file Form 990-PF, Return of Private Foundation.
Form 990, Form 990-EZ, or Form 990-PF must be filed by the 15th day of the 5th month after the end of your organization’s accounting period. Instructions for Form 990, Form 990-EZ, and Form 990-PF indicate the Service Center to which they must be sent.
A tax-exempt organization that fails to file a required return is subject to a penalty of $20 a day for each day the failure continues. The same penalty will apply if the organization fails to give correct and complete information or required information on its return. The maximum penalty for any one return is the lesser of $10,000 or 5 percent of the organization’s gross receipts for the year. If the organization has gross receipts in excess of $1,000,000, the penalties are increased to $100 per day with a maximum penalty of $50,000.
Even though an organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. An exempt organization that has $1,000 or more gross income from an unrelated business must file Form 990-T, Exempt Organization Business Income Tax Return. The obligation to file Form 990-T is in addition to the obligation to file the annual information return. Tax-exempt organizations must make quarterly payments of estimated tax on unrelated business income. An organization must make estimated tax payments if it expects its tax for the year to be $500 or more. The Form 990-T of a tax-exempt organization must be filed by the 15th day of the 5th month after the tax year ends. An employees’ trust must file Form 990-T by the 15th day of the 4th month after its tax year ends. For additional information, see the Form 990-T instructions or Publication 598, Tax on Unrelated Business Income of Exempt Organizations.
Every employer, including a tax-exempt organization, who pays wages to employees is responsible for withholding, depositing, paying, and reporting federal income tax, social security taxes (FICA), and federal unemployment tax (FUTA) for such wage payments, unless that employer is specifically excepted by statute from such requirements or if the taxes are clearly inapplicable. For more information, download Publication 15, Circular E, Employer’s Tax Guide, Publication 15-A, Employer’s Supplemental Tax Guide, Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, and Form 941, Employer’s Quarterly Federal Tax Return, or Form 944, Employer’s Annual Federal Tax Return
**Note Every organization exempt from federal income tax under Internal Revenue Code section 501(a) must file an annual information return except:
A church, an interchurch organization of local units of a church, a convention or association of churches,
An integrated auxiliary of a church,
A church-affiliated organization that is exclusively engaged in managing funds or maintaining retirement programs,
A school below college level affiliated with a church or operated by a religious order,
Church-affiliated mission societies if more than half of their activities are conducted in, or are direct at persons in, foreign countries,
An exclusively religious activity of any religious order,
A state institution, the income of which is excluded from gross income under section 115,
A corporation described in section 501(c)(1) that is organized under an Act of Congress, an instrumentality of the United States, and is exempt from Federal income taxes,
A black lung benefit trust described in section 501(c)(21) (required to file Form 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons),
A stock bonus, pension, or profit-sharing trust that qualifies under section 401(required to file Form 5500, Annual Return/Report of Employee Benefit Plan),
A religious or apostolic organization described in section 501(d) (required to file Form 1065, U.S. Return of Partnership Income),
A foreign organization, including an organization located in a U.S. possession that normally does not have more than $25,000 in annual gross receipts from sources within the United States,
A governmental unit or an affiliate of a governmental unit that meets the requirements of Revenue Procedure 95-48, 1995-2 C.B. 418,
A private foundation described in section 501(c)(3) and exempt under section 501(a) (required to file Form 990-PF, Return of Private Foundation),
A political organization that is a state or local committee of a political party, a political committee of a state or local candidate, a caucus or association of state or local officials, or required to report under the Federal Election Campaign Act of 1971 as a political committee.
An exempt organization (other than a private foundation) having gross receipts in each tax year that normally are not more than $25,000). Note, however, that these organizations may be required to file an annual electronic notice – e-Postcard (Form 990-N), for tax periods beginning after December 31, 2006.
See Requesting Filing Exemption for information on obtaining a determination that an organization is not required to file an annual return.
DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.