Every tax-exempt organization is required to file an annual 990 form. If an organization fails to do so, the IRS will likely impose some sort of penalty. In fact, failing to file 990 returns for three consecutive years can even lead to a loss of tax-exempt status.
Furthermore, these forms are extremely important to tax-exempt organizations and their functions, but why? Read through this blog to find out!
What’s in a 990?
990 series forms are tax-exempt returns that allow organizations to report their financial information and activities to the IRS. The information required to be reported includes
- The organization’s basic information, including name, address, and EIN
- Financial information such as revenue, expenses, assets, and liabilities
- Program service accomplishments
- Other IRS filings and tax compliance requirements
- Key personnel, governing body, and management details
It’s important to verify all of the information provided in its entirety. Providing incorrect information or failing to report required details may result in IRS 990 penalties for the organization.
Why are 990s so significant to my organization?
990 forms are important to an organization for two main reasons.
- First, these forms allow the IRS to keep tabs on an organization’s finances and distributions. The IRS will see if an organization is abusing its tax-exempt status and fulfilling its exempt purpose by managing finances correctly.
- Secondly, these 990 forms are important because they are available for public access. Volunteers and other supporters of the organization may want to know where donations are going and to what extent the organization is contributing to its cause. These forms also require information about program services and activities the organization participates in, which may also be relevant to potential supporters and contributors. Additionally, making these records public provides access to employee and staff details so that they can be contacted for any reason.
On top of these two reasons, regularly reporting this information will allow an organization to stay on top of its finances and keep up with its records.
What’s the penalty for failing to file?
As mentioned above, failing to file 990 or filing incorrectly may result in IRS penalties. These penalties can be pretty significant that may vary depending on the form the organization is required to file.
- Form 990, Form 990-EZ, and Form 990-PF penalties will be $20 per day late or $110 for larger organizations. This can reach a maximum of $11,000 or 5% of the organization’s annual gross receipts, whichever is lesser
- Form 990-N does not include a late filing penalty, but the IRS will send a reminder notice.
- Form 990-T penalties will be 5% of the unpaid tax for each month or part of a month that the return is late. The maximum penalty is 25% of the unpaid tax. If more than 60 days late, the maximum penalty is $435.
- Form 1120-POL penalties will be an additional fine equal to 5% of the tax due for each month the return is late. This cannot exceed 25% of the total amount of tax due. If your return is more than 60 days late, you are required to pay $135 or the remaining tax due, whichever is smaller.
- CA Form 199 penalties will be $5 per month, with a maximum penalty of $40
If an organization fails to file its return for 3 consecutive years, the IRS will revoke its tax-exempt status.
How do I file a 990 return?
As of 2019, the IRS mandates that all 990 returns be filed electronically. This allows for a quicker review process on the IRS’s end. You can e-file your return by finding an IRS-authorized e-file provider, like Tax 990.
E-filing with Tax 990
E-filing form 990 with Tax 990 is easier than ever. We provide many helpful features to assist you during the filing process. This includes the free automatic inclusion of required Schedules, which will be attached to your form based on the information you provide. Our program also includes an internal audit check, which will check your form for any IRS instruction errors and notify you before you transmit it to the IRS.
Just create a free account and get started today at Tax990.com!