What Kind of Form 990 Should You File?

by

in

This week, Nikita and Christina are talking about the different types of 990 forms!

Nikita

Hi guys, welcome back! My name is Nikita and I am the product manager for Tax990. Today, Christina is joining me again. She’s the product manager for TaxBandits. Just a little brief overview, Tax990 is an IRS-authorized e-file provider for your annual 990 series returns, and Christina is going to talk just briefly about TaxBandits. 

Christina

Hi everybody! So again, I’m the product manager for TaxBandits. We are also an IRS-authorized e-file provider, but we help more on the business and tax preparer like CPA side of things. We help with e-filing with the IRS, also the SSA in states, and we support over 40 different tax forms like 1099s, W-2s, 941s, that kind of thing. 

Nikita

Awesome! Um, so last week if you guys watched the show last week, we talked a little bit about IRS rejection errors on your 990 forms. We do have that posted on our page if you want to still check that out. 

Christina

Of course, they wanted to. 

Nikita

Of course, they want to check it. 

Christina

It was fantastic. 

Nikita

It was fantastic! Um, but this week we’re going to talk a little bit more about… we’re going to dive into the different 990 forms and what might apply to your specific organization and what you should file on an annual basis. 

So to get started, there are four main forms that an organization is going to choose from each year. So there is the 990-PF. There’s the 990-EZ the 990 form, and then the 990-N form

The forms are going to be based off of the type of organization you have and then your gross receipts and assets during the year. The form you choose is going to be based off of whether your organization is a private foundation or your gross receipts and your total assets at the end of the tax year.

Christina

If one of the big factors is whether or not the organization is classified as a 501(c)(3), and that’s an IRS classification, right? That’s not something they just decide to be, right? How do they know? What does that mean for them? 

Nikita

Yeah, so, then the private foundation, you know, if you’re a private foundation because that is the status you chose when applying for exempt status, and that is the status that the IRS gave you. 

So, last week, we talked a lot about your determination letter. This information, again, can be found on your determination letter. It is the live and breathe by an organization. But if you reference your determination letter, it will clearly state on there your organization is a private foundation, and you are required on an annual basis to file the 990-PF form

Christina

So, you can’t choose, there’s no other, that’s just what you do. 

Nikita

That’s what you do. And we do get a lot of questions on that, um, too, because unfortunately, it’s not going to be based off your gross receipts or your income or any of the activities you’ve done through the year. It’s solely based off the fact that you are or are not a private foundation. 

Christina

That really eliminates some of those easier forms there. That takes care of the first half of it, right? But what if the organization is not a private foundation, right? 

Nikita

So, if you’re not a private foundation, then you are going to file one of the other three forms, and that’s like I said, it’s going to be based on your income through the year, what your organization did.

So you have the 990-N, and that’s meant for organizations that had fifty thousand dollars or less in gross receipts at the end of the year. They can opt for the 990-N form. 

So the next level up would be the 990-EZ. So that’s for more than fifty thousand dollars but less than two hundred thousand dollars in gross receipts and less than five hundred thousand dollars in assets at the end of the year. 

Christina

That’s good to know.

Nikita

Right. So then you would file the 990-EZ form, and then the third level is going to be the 990 form. That’s the biggest form.

If you made over two hundred thousand dollars in gross receipts or over 500,000 in total assets, you have no choice but to choose the 990 long form. 

Christina

So of the forms that you just mentioned, one of the terms that I feel like nonprofits use a lot is the postcard, So how does that fall in with these four main forms? Is it one of them? How does that work? 

Nikita

So, we get a lot of confusion on that. The postcard is actually the 990-N form. So, if you are typically filing an e-postcard every year, you’re actually filing the 990-N form every year. 

Christina

Same thing, just different phrasing. 

Nikita

Yep, same thing, different phrasing. I don’t know why they do that, add a little confusion in there. You know, sprinkle in a little confusion. 

Christina

So, can an organization just file a different form every year, and they go rogue and just switch it up? 

Nikita

They can go rogue if they want to, if their assets allow, if their gross receipts allow for it. 

So, you know, during the pandemic, a lot of organizations weren’t operating, so for that tax year, we had a huge increase in 990-N forms because there was no operating, they just weren’t functioning. And then the following year and the year after, you know, things started coming back in the world and functioning again, so organizations started doing more volunteering, more donations, more events, and things like that fundraising. 

So, you can choose, you know, if you made less than 50,000 last year, you can file the 990-N. If you had a very successful year this year made over 200,000, then you can file the 990.

If it drops again next year, you can choose in between. I mean, whichever suits your needs. 

Christina

It’s just kind of based on what you did that year. That’s so good to know. I feel like that would be such a lesser-known fact because once you’re filing one thing, we tend to be creatures of habits, yeah, we just do the same thing. So maybe you’re doing more work than you need to, yeah, right. 

Nikita

Well, and as we talked last week about it as well, but with the turnover that organizations see, they might just hear down the pipeline, ‘Oh, we file the 990-N form.’ ‘Oh, well, this is what we’ve done all these years past.’ But you had a great year, so this year you can’t file Form 990, and you have to move up a form. So, like I said, it’s really just based on how your organization’s doing for the year 

Christina

And kind of actively keeping up with which one is it and not just following the same things. That’s a great point. When there’s turnover and you’re just doing what the last person did, right, maybe you don’t even know that you need to check. So, that’s definitely helpful. 

If you haven’t had it with my questions about who files what, if I am eligible to file a 990n or an e-post card as it were, can I file a 990-EZ instead? 

Nikita

Yes, so that’s a really good question because a lot of donors, a lot of grant applications, and a lot of different varieties of tools that organizations use require a larger form or even a lot of states. If an organization has to file with the state directly, the state requirements have, you know, a larger form requirement. 

So, you may qualify for the 990-N, but you really want to apply for this grant this year, and the grant requires an EZ. So, you can choose to file up. You can choose to file a 990 form instead of a 990-EZ or instead of a 990-N, so on and so forth.

The thing is, you can’t choose to file down. You can’t say, “Well, this one’s easier or this one’s fewer pages, so I’m going to do this one instead.” 

You have $200,000 in assets and grants but you file the N, saying, “Let’s skip all those extra pages,” that would not be good. 

Nikita

No, you can go up but you just can’t go back down. 

Christina

Good, good. And that makes sense because if you are applying for something, it would make sense that they would want more financial information that’s going to be a part of one of those. 

Nikita

Exactly, exactly.

Christina

One final question, that’s pretty obvious at this point, I think we’re all on the same page, but does the IRS care which form I file? 

Nikita

Oh, that’s such a fine line. I think, you know, the IRS cares that you file annually to maintain your status, obviously. And you want to file annually to keep from being penalized or have fees due or whatever. The IRS cares about that. And then they care that you choose the right form to meet the needs of your organization. Um, you know, they absolutely care for your private Foundation that you file in 990-PF, and they will reject your form if you don’t.

They care, like I said, if you have the appropriate financial information for the 990 or EZ form, that you file that form accordingly. But otherwise, you know, they just want the form to be shown up on their front doorstep and you know, let you move on with your fundraising. 

Did you have any other questions? 

Christina

I think that’s all of my questions for this week, but we’ll make sure to have some more in the future. 

Nikita

Yeah, sounds good. 

So, um, thank you for joining us. Hopefully, this was helpful. If you have any topics that you want us to talk about or learn more information about, please let us know. You know, we’re always taking ideas and feedback, and we’d love to help you guys out as much as we can. 

Go ahead and subscribe to our channel so you can get some updates when we post new videos and things. 

We will, next week, um, I think, be talking probably about the IRS mandate for e-filing because that’s still a pretty big thing in the organization world, in the nonprofit industry, things like that. 

We’ll probably dig into that a little bit deeper next week, but like I said, check us out, add a comment, add a topic, whatever you like, and thank you for joining us!