Even though a tax-exempt organization does not pay income tax on its revenue, it still must file an annual return with the IRS. Officials of tax-exempt entities can ensure that their organizations maintain their exempt status by filing the appropriate form each year.
Depending on the level of receipts, tax-exempt organizations are required to file only one out of three different IRS forms. The lengthy form required of a large national organization is very different from the short form required of a local animal rescue operation. For organizations of medium size, there is an applicable form. The three options are Form 990-N, Form 990-EZ, and Form 990.
Organizations with revenue of up to $50,000 may file Form 990-N, which is a very short form. Form 990-N is not even available on paper and must be electronically filed. Perhaps due to its brevity, Form 990-N is also referred to by the IRS as an e-Postcard.
Exempt organizations with over $50,000 in revenue cannot file the short e-Postcard. For larger organizations, your selection of form depends on both revenue and the amount of assets owned by the organization.
Exempt organizations that are not eligible for the e-Postcard must file Form 990-EZ if total assets are less than $500,000 and revenue is under $200,000. Form 990-EZ requires a greater amount of detailed information about revenue, expenses, and assets.
Form 990-EZ also includes a form section for listing key officials of the organization, along with their respective amounts of compensation received. Questions are also included on Form 990-EZ concerning the activities of the organization.
Form 990 must be filed by exempt organizations with revenue of $200,000 or greater. Form 990 is also required if assets total $500,000 or more. Form 990 is quite detailed and is filed by the largest exempt organizations.
Maintaining your tax-exempt status is essential to ensure that contributions to your organization are tax-deductible to the donor. The IRS maintains a useful lookup tool that lists organizations eligible to receive tax-deductible donations. Smaller churches with receipts of $50,000 or less are automatically eligible to receive tax-deductible donations, but they are not required to file an e-Postcard.
An organization will lose tax-exempt status for itself and for donors if it fails to file the required information return for three consecutive years. Contact an accounting firm, such as Herman & Cormany, for more information about the filing requirement for your exempt organization.