Nonprofits have tax deadlines too

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Photo by Alan Cleaver (Flickr/Creative Commons)

If you hurried to the Post Office today to pay your taxes or claim your refund, you’re in good company. Estimates are that 25% of U.S. taxpayers file on the last day each year. But don’t expect long lines at the post office; the IRS is hoping 80% of returns will be filed online, up from 77% last year. The deadline (technically tomorrow this year because of a holiday in Washington, DC) is critical for individual taxpayers – filing late results in penalties and interest for everyone.

Nonprofits get a break on their filing deadline in two ways: First, the due date for organizations with a December 31 fiscal year end is not until May 15th. And second, larger organizations can get an automatic six-months extension to pull their records together just by filing Form 4868.

But the risks for nonprofits of not filing at all are pretty dire. More than 400,000 entries have been removed from the roster of tax-exempt organizations since a 2006 law took effect. The IRS is now required to cull out of the list recognized organizations that don’t file the required reports for three consecutive years. When that happens, donors can’t take deductions from their personal taxes (and may have to file amended personal tax returns – a double whammy) and the organization will probably have to start all over again—filing a new application for recognition and paying the fees—if it wants to continue to operate. Not a good thing.

The “information return” that nonprofits file is called IRS Form 990. It comes in several versions. Time and trouble can be saved by picking the right one.

  • Use Form 990-N (the “e-postcard”) if total revenue from all sources is normally less than $50,000 per year. Note that Form 990-N is only available online (there is no paper verson) and, though there’s no penalty for filing late, there’s also no way to get an extension. So that three-times-you’re-out rule applies to an organization that missed the last couple of years and then files late this year.
  • Use Form 990-EZ if total revenues (the IRS calls it “gross receipts”) are less than $200,000 and total assets are less than $500,000.
  • Bigger organizations use the full Form 990. And private foundations have their own different version called Form 990-PF.

The Urban Institute offers an electronic filing service for groups that need to do a 990-EZ or a full 990 and don’t have anyone else to do it. Information about how that works is online at efile.form990.org. The service is free for organizations with less than $100,000 in revenue and carries a small fee for groups with larger annual budgets.

Larger organizations will usually have staff or outside help with accounting and bookkeeping to keep them on track with these requirements and deadline. Smaller organizations need to be sure they have clear answers to a short, but important, list of questions:

  • When is our filing deadline? It’s always four months and fifteen days after the end of the last fiscal year.
  • What do we need to know to be sure we stay current with all these rules and regs? The IRS website is a good place to start – a list of frequently asked questions is here.
  • Who is going to file our Form 990-N? It takes a few minutes, access to a computer, and knowing the answers to a few simple questions. But somebody has to do it.

If you’re not sure all three questions have been answered for an organization you care about, then tomorrow—after your personal tax return is safely on its way—would be a good time to start getting things sorted out to be sure everything goes smoothly this year.

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