Do Schools and Educational Organizations Need to File a 990?
Yes! Even after obtaining tax-exempt status, your School/Educational Organization still must report their financial status, activities, and certain other information to the IRS every year. Depending on their gross receipts, assets, and information reported on the form, there may be additional requirements as well. While it’s easy for all this information to seem overwhelming or intimidating, a little help goes a long way toward making the whole process a lot easier–and that’s exactly what Tax 990 aims to do!
First Off–How Do Schools and Educational Organizations Obtain Tax Exempt Status?
Similar to other nonprofit organizations, Schools and Educational Organizations categorized under section 170(b)(1)(A)(ii) can also qualify as tax-exempt if they fulfill all the 501(c)(3) requirements–which are:
- The organization is established and operated exclusively for religious, educational, scientific, or other charitable purposes.
- No part of the earnings should benefit private shareholders.
- Must not attempt to influence legislation through any substantial activities.
- Must not intervene in political campaigns.
- Should not carry out any illegal or unlawful activities, or any other activities, that violate fundamental policies.
Private schools may also have additional requirements to fulfill in order to be eligible for tax exemption–for instance, they should have a “Racially Nondiscriminatory Policy as to Students” in place to ensure that no student is subjected to any racial discrimination by the school.
How Do Schools/Educational Organizations Apply for Tax-Exemption?
Schools seeking tax exemption under Section 501(c)(3) need to file Form 1023 – Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the IRC.
If the school’s gross receipts are less than $5,000 in a tax year, they may be able to file Form 1023-EZ (depending on their answers on the eligibility worksheet).
Besides Being a Requirement, What Else Does Filing a 990 Do for My School/Educational Organization?
All 501(c)(3) organizations and other tax-exempt parties must still provide the IRS with details on their financial information and activities every year–which is where Form 990 comes in. And while schools and educational organizations may be required to report, there are a number of reasons why doing so would prove beneficial regardless:
- Transparency: Schools and educational organizations are probably the one type of nonprofit where donors are most interested in seeing their contributions be put to good use. By making this clear, potential donors are more likely to give.
- Accountability: Like the previous point, this one is all about being trustworthy to donors and contributors. A Form 990 shows what an organization brings in and spends, showing donors that the money is being well spent.
- Increased Revenue: When your donors can see how the money is being spent and can see how much good you’re doing with it, you can expect to see an increase in those donors and their donations!
What Exactly Do I Need to File?
Now that you know why you might want to file a Form 990, you may find yourself wondering what exactly you need to file. Good news! It’s simple and easy to figure out what form you need based on their gross receipt:
- Form 990-N: Schools/Organizations with gross receipts of $50,000 or less can file Form 990-N (e-Postcard)
- Form 990-EZ: Schools/Organizations whose gross receipts are less than $200,000 and total assets less than $500,000 at the end of the taxable year can file Form 990-EZ
- Form 990: Schools/Organizations whose gross receipts are equal to or higher than $200,000 and total assets equal to or greater than $500,000 at the end of the taxable year can file Form 990.
It’s important to note that any organization with an unrelated business gross taxable income of $1,000 or more in a tax year is required to file Form 990-T (Exempt Organizations Business Income Tax Return).
When is the Deadline for Schools and Educational Organizations to File a 990?
The deadline to file Form 990 depends on the school/educational organization’s tax year. Generally speaking, 990 forms are due by the 15th day of the 5th month following the organization’s tax year–meaning organizations operating on the calendar tax year must file their Form 990 by May 15th.
Operating on a fiscal Tax Year? Use our due date calculator to find your deadline!
Penalties and Automatic Revocation
- Tax-exempt schools/educational organizations that fail to file 990 returns on time may face penalties. These penalties range from $20/day up to $110/day, depending on the school/organization’s gross receipts.
- Schools that fail to file 990 forms for 3 consecutive years may face automatic revocation of their exempt status.
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