Introduction
Tax-exempt organizations are required to file annual information returns with the Internal Revenue Service (IRS) to maintain transparency and accountability. The Form 990 series serves as the primary mechanism for reporting financial details, governance practices, and program activities. Depending on the organization’s size, revenue, and specific circumstances, different variations of Form 990 are used.
Below is a breakdown of the different types of Form 990 that tax-exempt organizations may need to file:
Form 990
Form 990 (Return of Organization Exempt from Income Tax)
Who Files?
- Large tax-exempt organizations with gross receipts of $200,000 or more or total assets of $500,000 or more at the end of the tax year.
Purpose:
- Provides a comprehensive look at the organization’s finances, governance, and mission-related activities.
- Includes details about revenue, expenses, executive compensation, and lobbying activities.
- Helps the IRS and the public evaluate the nonprofit’s financial health and compliance with regulations.
Form 990-EZ
Form 990-EZ (Short Form Return of Organization Exempt from Income Tax)
Who Files?
- Medium-sized tax-exempt organizations with gross receipts less than $200,000 and total assets less than $500,000 at the end of the tax year.
Purpose:
- A shorter, less detailed version of Form 990.
- Still requires disclosure of financial activities, governance policies, and executive compensation, but with fewer reporting requirements.
Form 990-N
Form 990-N (e-Postcard)
Who Files?
- Small tax-exempt organizations with gross receipts of $50,000 or less.
Purpose:
- Simplified filing process to maintain tax-exempt status.
- Organizations only need to provide basic information such as name, address, EIN, and confirmation of continued operations.
- Must be filed electronically.
Note:
- If an organization fails to file Form 990-N for three consecutive years, it will automatically lose its tax-exempt status.
Form 990-PF
Form 990-PF (Return of Private Foundation)
Who Files?
- Private foundations, regardless of financial size.
Purpose:
- Reports on foundation assets, grants, and contributions to maintain compliance with IRS regulations.
- Discloses excise taxes paid on investment income.
- Required for foundations that do not primarily rely on public contributions but rather on private endowments.
Form 990-T
Form 990-T (Exempt Organization Business Income Tax Return)
Who Files?
- Any tax-exempt organization that generates $1,000 or more in unrelated business taxable income (UBTI).
Purpose:
- Even though tax-exempt organizations do not pay income tax on their mission-related revenue, they must report and pay taxes on income earned from unrelated business activities (e.g., renting out property, selling merchandise unrelated to their mission).
- Helps prevent tax-exempt organizations from engaging in excessive commercial activities that compete with for-profit businesses.
Conclusion
Filing the correct Form 990 is crucial for tax-exempt organizations to remain compliant with IRS regulations. These forms provide transparency into the operations, finances, and governance of nonprofits, ensuring accountability to donors, the government, and the public.
Failing to file the required Form 990 can result in penalties or even loss of tax-exempt status for failure to file for three consecutive years.
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