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ExpressTaxExempt Blog

Thursday, June 26, 2014

Form 990-EZ: Schedules and Attachments

Schedules are a vital part of the Form 990-EZ. They allow the tax-exempt organization to go into further detail on sections of the form that would otherwise prove difficult in supporting its reason for being tax-exempt. In other words, schedules are the megaphone of the organization with regard to the 990-EZ. The IRS stresses that the 990 series isn't simply a bunch of tax forms, it’s also a chance for the organization to “sell” itself to potential donors. Each schedule is designed to provide specific information on certain activities. The narrow scope of each one allows the organization to go into deeper detail instead of trying to paint a broad image in a limited space.

The applicable schedules for Form 990-EZ are as follows:
  • A (Public Charity Status and Public Support) 
  • B (Schedule of Contributors)
  • C (Political Campaign and Lobbying Activities) 
  • E (Schools) 
  • G (Supplemental Information Regarding Fundraising or Gaming Activities)
  • L (Transactions with Interested Persons) 
  • N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets)
  • O (Supplemental Information to Form 990 or 990-EZ). 
Attachments can be name change amendments to organizing documents, reasonable cause explanations for late-filed returns, and articles of merger or dissolution, resolutions, and plans of liquidation or merger.

Please keep in mind that schedules, just like the 990-EZ itself, are available to the general public. This means to be very careful about the information put on them. The IRS estimates that around 20% of organizations still place sensitive information, like the Social Security numbers of their principal officers, on these schedules. Doing so could prove disastrous for both your employees and your organization.

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Wednesday, June 18, 2014

Understanding the Basics of IRS Form 990-EZ

Have you ever read through the information on the IRS website for Form 990-EZ in its entirety? It never ends, those instructions seem to go on forever like Lambchop's "Song That Never Ends". The material can be condensed down a smidgen to a nice outline to help you understand the basics of IRS Form 990-EZ.

Purpose of Form 990-EZ
The 990-EZ was created to provide a shorter alternative to filing Form 990. It is used by tax-exempt organizations, nonexempt charitable trusts, and section 527 political organizations to provide the IRS with the information required by section 6033.

General Instructions
There are multiple parts for the 990-EZ, but Parts I-V must be completed by all filing organizations. Part VI will need to be completed by section 501(c)(3) organizations and section 4947(a)(1) nonexempt charitable trusts. Here is a list of the information you will need to complete Form 990-EZ:
  • Gross Income
  • Total expenses incurred within the last year
  • Disbursements within the year that are the reason the organizations is exempt
  • Balance sheet showing assets, liabilities, and net worth
  • Total contributions & gifts received during the year and the names and addresses of all substantial contributors
  • Names and addresses of the foundation's managers and highly-compensated employees
  • compensation and other payments made during the year
  • Lobbying expenditures and nontaxable amounts
  • Direct or indirect transfers and relationships with other organizations of the same type
  • Respective amounts of the taxes imposed on the organization or any manager of the organization
  • Amounts of reimbursements paid by the organization during the taxable year for any taxes imposed 
  • Information on any excess benefit transaction
  • Information on any disqualified persons
  • Information on disaster relief activities
Who Can File
You will need to file Form 990-EZ if your tax-exempt organization has gross receipts of less than $200,000 or total assets of less than $500,000. This form is due on the 15th day of the 5th month after the organizations accounting period ends. 

Extension of Time To File
You can always extend your Form 990-EZ filing deadline with Form 8868, also provided by Express990.com. This extension will automatically give you an additional 3 months to file.

These are just your basics to understanding Form 990-EZ. Next time we will get into the nitty-gritty Conditions for a Properly Completed Form 990-EZ.

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Monday, June 16, 2014

IRS Form 990 Deadline Today

The IRS deadlines keep on spinning. If your nonprofit organization falls under the Feb 1, 2013- Jan 31, 2014 tax period, then your IRS Form 990 is due TODAY! Don't worry, you can gain more time with a Form 8868 extension, Express990.com has got your covered. But first let's go over your options of the 990 series so you know exactly what to file.

Form 990-N is for smaller nonprofits with $50,000 or less in gross receipts. The 990-N is called and e-postcard and only takes a few minutes (if that) to complete and transmit to the IRS. You need to have some business information ready to go including: EIN, legal name & address, different names the organizations uses (if any), website (if any), name and address of Principal Officer, confirmation of $50,000 or less in gross receipts, and a statement the organization is going out of business (if applicable).

Form 990 is used by most organizations exempt from income tax under section 501(a). If your nonprofit has gross receipts greater than or equal to  $200,000 or total assets greater than or equal to $500,000 at the end of the tax year, the the Form 990 is for you. You can always extend your deadline with Form 8868, and we will be getting to that in just a moment.

Form 990-EZ is used by tax-exempt organizations, nonexempt charitable trusts, and section 527 political organizations to provide the IRS with the information required by section 6033. This form is for those exempt organizations with gross receipts less than $200,000 or total assets less than $500,00. You also have to option to extend the filing deadline for this return with Form 8868.

Form 990-PF is used to figure the tax based on investment income, and to report charitable distributions and activities. This form also serves as a substitute for section 4947(a)(1) nonexempt charitable trust's income tax return, Form 1041, U.S. Income Tax Return for Estates & Trusts, when the trust has no taxable income. Like the previous two 990 forms, the deadline to file Form 990-PF can also be extended with Form 8868.

Extending your deadline with Form 8868.
First things first, you can not use Form 8868 to extend the filing deadline of Form 990-N (e-postcard). But for the other forms in the 990 series, you have the option to extend your deadline. Express990.com provides Form 8868 "Application for Extension of Time to File an Exempt Organization Return" that can give you an automatic 3-month extension to file your Form 990, 990-EZ, 990-PF. Learn more...

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Wednesday, June 11, 2014

990 News: Revenue Procedure 2014 - 11

Revenue Procedure 2014-11 is a publication by the IRS outlining the process for gaining retroactive reinstatement for exempt organizations. Should an organization fail to file a Form 990 (and any form from the 990 series) for three consecutive years, its tax-exempt status is automatically revoked. This can mean big fines, penalties, and taxes. Thankfully, the IRS has created this process for first-time offenders.

There are three options for tax-exempt organizations to regain their exempt status and have it retroactively reinstated; we will discuss each individually. The first two are applicable only to those organizations who have had their exempt status revoked no more than 15 months prior to reapplying.

An organization that was eligible to file either Form 990-EZ or 990-N for each of the three consecutive years that it failed to file, and that has not previously had its tax-exempt status automatically revoked, may apply to have its tax-exempt status retroactively reinstated effective from the Revocation Date if it does both of the following:

  1. Completes and submits an Application at the address provided in the instructions to the Application not later than 15 months after the later of the date of the Revocation Letter of the date on which the IRS posted the organization’s name on the Revocation List. To help facilitate processing, organizations should write “Revenue Procedure 2014-11, Streamlined Retroactive Reinstatement” on the top of the Application.
  2. Include the appropriate user fee with the Application. 

An organization that is not eligible for the aforementioned procedure may apply to have its tax-exempt status retroactively reinstated effective from the Revocation Date if it does all of the following:

  1. Completes and submits the appropriate Application to the address provided in the instructions to the Application not later than 15 months after the later of the date of the Revocation Letter or the date on which the IRS posted the organizations name on the Revocation List. To help facilitate processing, organizations should write “Revenue Procedure 2014-11, Retroactive Reinstatement” on top of the Application.
  2. Includes the appropriate user fee with the Application
  3. Includes the Reasonable Cause Statement
  4. Includes a statement with the Application confirming that it has filed the Annual Returns required in the below step
  5. Files properly completed and executed paper Annual Returns for all taxable years in the consecutive three-year period for which the organization was required, and failed, to file Annual Returns (and for any other taxable years after such period and before the Post-Mark Date for which required returns were due and not filed). The Annual Returns must be mailed to the follow address:
Department of the Treasury

Internal Revenue Service Center

Ogden, UT 84201-0027

For those organizations beyond the 15-month mark, the IRS has another method for regaining reinstatement that requires a bit more work. An organization that applies for reinstatement of its tax-exempt status more than 15 months from the later of the date of the Revocation Letter or the date on which the IRS posted the organization’s name on the Revocation List may have its tax-exempt status retroactively reinstated effective from the Revocation Date only if it satisfies all the requirements of the aforementioned section, and except that it must provide the Reasonable Cause Statement for all three years instead of just one.

As you can see, the process is very in-depth but well worth the effort. We recommend it to any organization that needs to be reinstated and wishes to have retroactive exempt status as well. Make sure that you have all of your information before attempting to file for reinstatement. Contact the IRS to ensure that you have all the necessary documentation and have taken all of the necessary steps for filing.
Life Cycle of an Exempt Organization

With things changing so quickly, it’s hard to pin down exactly what stage your organization is in. Luckily the IRS has narrowed the process down into 5 steps, or the “Life Cycle” of your exempt organization. All tax documents relating to exempt organizations are written to fit into these 5 stages:

1. Starting Out: Creating an organization under state law, acquiring an employer identification number, and identifying the appropriate federal tax classification

2. Applying for Exemption: Acquiring, completing, and submitting application forms; how the IRS processes applications; and getting help from the IRS during the application process

3. Required Filings: Annual exempt organization returns, unrelated business income tax filings, and other returns and reports that an organization may have to file

4. Ongoing Compliance: How an organization can avoid jeopardizing its tax-exempt status, disclosure requirements, employment taxes, and other ongoing compliance issues

5. Significant Events: Audits, private letter rulings, and termination procedures

Somewhere within these 5 stages is where your organization falls with the IRS, and Express990 is here to help make sorting through the chaos a little bit easier. Our free 990-N service helps smaller organizations remain compliant at no cost to them. We also provide the chance to extend your filing deadline with Form 8868, so you can get a little breathing room between you and that pesky 990 deadline. We've designed our site for the everyday taxpayer, not the tax professional, so you can file your forms quickly and get back to doing what you love.

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Wednesday, June 4, 2014

IRS 990 Webinar Recap

On May 29th, the IRS covered a variety of issues on the Forms 990-N and 990-EZ. Over the hour-long session, the two-person panel discussed topics such as the purpose of the 990 series, who needs to file, common errors found on the forms, the advantages of e-filing, what should go on the forms, suggestions to make the filing process a little less tedious, and how to achieve reinstatement if your organization’s tax-exempt status has been revoked. The overview was in-depth and very educational. Since it was moderated by two IRS officials, CE (Continuing Education) credit was offered for professionals. The presentation lasted approximately an hour, spanning from 2 PM to 3 PM EST, and consisted of a slideshow and voiceover analyses by the two moderators. And yes, we actually stayed awake for the whole thing. 

The Breakdown:
The IRS maintains that the 990 series is not simply a “tax form,” but is also to provide information to the general public and interested contributors. Since it’s a public document, any organization may file the Form 990 and is required to do so if it is hoping to achieve tax-exempt status. Even those organizations that have applied for exempt status but have not been accepted are required to file. Be warned, everything you put on the Form 990 is available to the public and the IRS strongly discourages organizations from putting personal information on the document. Despite these warnings, some 20% of organizations still submit 990s containing Social Security numbers.

While it may seem long, compared to the Form 990, the Form 990-EZ is relatively short: just 4 pages compared to the 12-page document that is the Form 990. Even still, the task of completing the form can be daunting and the IRS recommends making it a group effort to ease the stress for everyone involved. Have those employees that best understand each section of the 990-EZ work on it individually and then combine the sections and complete any necessary schedules. For example, your events manager may know more about the fundraising dinner you had last week than the public relations manager. Alternatively, the public relations manager may be able to better describe the purpose of your organization better than your accounts payable manager. No matter the case, the filing process will become less and less of a headache when the burden of collecting information is shared. It’s the classic Scooby-Doo approach!

Speaking of filing, the IRS recommends that all organizations e-file, even if they are not required to. An astounding 24% of Forms 990 paper filed with the IRS contain errors, while only 1% of e-filed forms contain errors. This fact alone should be enough to convince any organization to switch but if it isn’t, consider this: the fines for filing incorrect or incomplete forms are equal to the fines for filing late, a hefty penalty to pay without a doubt. E-filing, and especially e-filing with Express990, can save you not only money, but time as well. Our software helps calculate certain expenses and revenues, so there’s no punching calculator buttons or worrying about human error.

The most important topic covered was the Revenue Procedure 2014-11 discussion. This IRS publication discloses valuable information on retroactive reinstatement, meaning that organizations that have had their exempt status revoked may be able to be get it back without owing any taxes. The webinar mentioned three particular situations covered by the Rev. Proc. 2014-11, but many more apply. They also discussed different factors for “reasonable cause”; reasons why the organization had not filed a Form 990 or had been delinquent in filing for several years. Keep in mind, though, that these options apply predominantly to those organizations that are “first-time offenders.” If your organization has previously lost its tax-exempt status, it may not be able to access this reinstatement process.

In Conclusion,

The webinar was helpful and informative. We enjoyed listening and watching it, and we hope this blog was useful for you. We covered the main areas of the panel discussion, but there’s a lot more out there. You can access the information for yourself on the IRS website or read up on some more interesting facts on our FAQs page. There are some big things coming to Form 990 filing and we’re excited about them! There will be a second webinar on June 19th for UBI (Unrelated Business Income). We will be attending and writing a summary for it as well. Stay tuned for more blogs and discussions!

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Frequently Asked Questions

Find answers related to e-filing IRS Form 990, 990-EZ, 990-PF, 990-N (e-Postcard), Form 1120-POL and Extension Form 8868 with our Frequently Asked Questions.

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