Applying for tax returns: How should an NPO go about it?

It isn’t really uncommon for nonprofit organizations to get in trouble for forgetting to file their tax returns with the IRS. In most cases, nonprofit organizations that are tax-exempt do not have to pay up the federal taxes. However, they do still have to file an annual informational return with the IRS. One would have to use a form 990 tax return for a non profit to keep the organization compliant with the regulations of the IRS. 

What is IRS Form 990?

All 501(c)(3) private foundations need to fill up a form reporting form known as Form 990 to file their tax returns. Using the form, the general public and the IRS can evaluate the nonprofit’s finances, operations’ and mission. As per the basis of the size of the organization, it may also file variations of Form 990, such as 990-EZ or 990N.

Which form 990 should your organization file?

You would have to choose the right Form 990 for your NPO depending on its size. Here is a swift overview of the three major options:

1. Form 990-N

This form is typically a viable option for the smallest organizations. If your nonprofit has gross receipts of USD 50,000 or less, it may file Form 990-N. It is possible to file this form online, as an e-postcard. A nonprofit eligible for Form 990-N must file it by the 15th day of the fifth month after the ending of the organization’s tax year. 

2. Form 990-EZ

If a nonprofit organization has assets worth less than USD 500,000 and gross receipts lower than USD 200,000, it may file the simplified Form 990-EZ. The form consists of six parts and requires the organizations to provide various information, such as revenues, expenses, fund balances, a list of directors, trustees, officers, key employees, and more. It also requires an authorized person to sign the tax returns. 

3. Form 990

This is the complete Form 990 and organizations of any size may choose to file it. However, if your NPO owns assets of more than USD 500,000 and gross receipts higher than USD 200,000, it is obligatory to file this form. The complete Form 990 shares various similarities with the Simplified Form 990-EZ. However, this form also requires the organization to provide various additional in-depth information and attach different schedules. 

How to file a Form 990?

Errors in filing tax returns can prove to be costly mistakes. A non-profit organization may end up facing legal hurdles or fines if the filed form does not disclose all the required information correctly. Hence, it is best to have it filed by experienced professionals. Certain reputed companies offer tax return filing services for nonprofit organizations. While trying to find the best company for this job, look for the following factors:

If your organization is relatively new, look for a company that can provide you with a non profit organization startup package that would include various relevant services. 

The company must have a good track record in helping nonprofits file their tax returns successfully. 

The leading companies in this field have various reputed organizations as their clients. Check if a company’s client base includes prominent nonprofits. 

Besides accuracy, one of the other reasons behind hiring a professional company is to avoid hassles. You may want to pay attention to how simple or complex the whole process would be. 

Failure in filing tax returns in time may potentially cause a nonprofit organization to lose its tax-exempt status. The NPO would then have to pay a fee to the IRS to get the status reinstated. The right company can help your organization avoid all such hassles and maintain a good profile. Individuals planning to create 501c3 nonprofit organization may also hire 501 (c) 3 services from such companies.