ExpressTaxExempt Blog

Tips for Reporting Supplemental Financial Statements

Each time your organization answers “Yes” to a question on Form 990, Part IV, you’re required to complete the applicable schedule and provide explanations that are relevant to the question.

If your organization doesn’t have any further information to provide with a schedule, then you should answer “No” to the corresponding question on Form 990, Part IV.

Submitting a complete and accurate 990 form is critical to remain compliant with the IRS and to avoid any penalties or audits. Here are some key rules from the IRS about reporting important supplemental financial statements.

Donor Advised Funds
Tax-exempt groups that managed donor advised funds at any time during the tax year need to answer “Yes” to Line 6, Part IV. A donor advised fund or similar funds are accounts in which the donor, or someone appointed by the donor, has advisory privileges over the use of any portion of the account.

If information about donor-advised funds applies to your organization, you must provide the total number of managed accounts for the year, the aggregate value of contributions made during the year, the aggregate value of grants given during the year, and total aggregate value of funds at the end of the year.

Conservation Easements
A conservation easement is an agreement established for the purpose of conservation and preservation of property held by the organization. If you answer “Yes” to Line 7, Part IV, you need to explain to the purpose of the conservation easement held by your organization.

If you indicate that your organization held a qualified conservation contribution in the form of a conservation easement on the last day of the tax year, you’re responsible for providing follow-up information such as the total number of easements and total acreage restricted.

Art and Museum Collections
Answer “Yes” to Line 8, Part IV, if your tax-exempt group maintained collections of works of art, historical treasures, and other similar assets at any time during the tax year. Be prepared to indicate revenue related to collections and assets related to collections reported under SFAS 116 (ASC 958).

You’re also required to state the significant use of the collection items, a description of the organization’s collections, and an explanation how they further the organization’s exempt purpose. And finally, report if items from the collection were sold to raise funds rather than maintained.

Escrow or Custodial Accounts
Organizations that have funds in an escrow or custodial account for other individuals or organizations, provides credit counseling services or debt management plan services, or acts as an agent, trustee, custodian, or another intermediary for contributions or other assets should answer “Yes” to Line 9, Part IV.

If your organization acts as an agent, you’ll need to enter the escrow or custodian fund details including beginning balance, addition amounts, distribution amounts, and ending balance for the year and also provide an explanation of the arrangement.

Endowment Funds
If your organization held assets in temporarily restricted endowments, permanent endowments, or quasi-endowments, you should answer “Yes” to Line 10, Part IV. You’re required to enter the amounts of the current year and prior year contributions, grants, administrative expenses, and asset transfers to the organization's endowment funds.

Report the estimated percentage of your organization’s total endowment funds and also provide information on other endowment funds that are not in your possession. Near the end, you need to describe the intended uses of the organization’s endowment funds.

With ExpressTaxExempt.com, you are guided effortlessly through each of these sections. If you answer “Yes” to any of the initial questions, our application presents the required follow-up questions, and your answers are entered in the generated schedules automatically.

Contact our U.S. - based customer support team for any questions or further assistance with e-filing your 990 form through our cloud-based service. We’re available at 704.839.2321, Monday through Friday from 9 a.m. to 6 p.m. EST. Or reach us via email with support@ExpressTaxExempt.com.

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Requirements for a Properly Completed IRS 990 Form

Every tax-exempt organization required to file IRS Form 990 or Form 990-EZ must complete Parts I through XII along with a Schedule O and any other schedules applicable to your organization. The same rules apply to tax-exempt groups who aren’t required to file a tax return but choose to do so.

Submitting an incomplete 990 form is similar to filing late - it can cost you thousands of dollars in penalties and late fees or even a loss of exemption status. Here are a few guidelines from the IRS about completing a 990 return correctly.

Signature and Recordkeeping
A 990 form is never complete with a signature - a primary officer that’s filing the form usually signs the return. If you are filing on behalf of an organization, your signature is required along with the primary officer.

Your organization’s records need to be archived and accessible for the provisional administration of the Internal Revenue Code for a minimum of three years - this includes documents supporting an item of income, deduction, credit, or basis of property. It’s also helpful to keep copies of prior year tax returns for future reference or amended filings.

Rounding Off to Whole Dollars
When filing returns and schedules, exempt organizations must round off cents to whole dollars. Increase amounts with 50 cents or higher to the nearest dollar - you can also decrease to the nearest dollar for amounts with less than 50 cents. If you are adding numbers together, you should only round the total sum.

Complete All Lines
You must make an entry for each line that requires an amount or any other information, even if the value is zero. Applicable lines should not be blank unless the instructions expressly say to skip. All Form 990/990-EZ must include a Schedule O which is used to provide explanations or additional information.

Reporting Proper Amounts
Some sections require information you've reported on other IRS forms. If you realize that numbers reported are incorrect, you should enter the correct values on the 990 return and also submit an amended form with the proper information.

The IRS also asks that you not report negative numbers - you should use zero as the value unless the instructions explain otherwise. Report expenses and revenue separately and do not combine related items.

Inclusion of Activities and Items of Disregarded Entities and Joint Ventures
Organizations must report all revenues, expenses, assets, liabilities, and net assets or funds of a disregarded entity or shares of the same items from a joint venture, other investment, or arrangement treated as a partnership. You are also responsible for reporting activities of your disregarded entity or a joint venture on the appropriate parts or schedules of the 990 form.

Reporting Information from Third Parties
There are a few sections that request information you may need to obtain from a third party - this can include various things like compensation paid by related organizations; family and business relationships between officers, directors, trustees, key employees, and individual businesses they own or control, etc.

You are responsible for getting and reporting this information. If you cannot retrieve through reasonable efforts or tax extension, you can explain or give an estimate with your Schedule O.

With ExpressTaxExempt.com, our interview-style process seamlessly guides you through each section of the 990 form and automatically generates appropriate schedules based on your answers. You won’t have to worry about questions that don’t pertain to your organization, and at the end, we present your entire tax return with its proper requirements for you to transmit.

Our U.S. - based support team of e-file professionals is available for questions or assistance with accurately sending your 990 tax return to the IRS. Call us at 704.839.2321, Monday through Friday from 9 a.m. to 6 p.m. EST. And we’re also available via email with support@ExpressTaxExempt.com.

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Reporting Unrelated Business Income

For some exempt organizations, generating sufficient funds sometimes requires going beyond traditional fundraisers and generous contributions.

Tax-exempt groups are eligible to participate in trades and businesses with no correlation with their exemption purpose or function to bring income.

Revenue from unrelated businesses such as operating a museum or selling products is subject to corporate income tax rates. You must report the earned income on your annual tax return and pay the tax amount on time as mandated by the federal government.

Here is some valuable information about properly reporting unrelated business income to the IRS.

IRS Form 990/990-EZ and Form 990-T
If your organization’s total gross revenue from all its unrelated trades or businesses is more than $1,000 for the tax year, you must indicate it on your 990 or 990-EZ tax return. You are also responsible for filing a separate 990-T form.

IRS Form 990-T is a tax return specifically for business income from exempt organizations. The amounts of unrelated revenue and expense you report on your 990 form are the same that you report on the 990-T. Neither form substitutes the other - the IRS requires both returns to be filed if applicable.

Important: It’s mandatory for all tax-exempt groups with unrelated business income to pay estimated taxes with their return if their tax liability is expected to be more than $500. The IRS has its Form 990-W available for organizations to figure out their estimates.

Report Unrelated Income with ExpressTaxExempt
Filing unrelated business income along with the rest of your 990/990-EZ form is quick and easy at ExpressTaxExempt.com. Once you reach the proper section, indicate that your organization filed a Form 990-T for the tax year and then enter your net unrelated business taxable income from Line 34 of your 990-T - that is it!

Keep in mind that you are responsible for separately sending a Form 990-T to the IRS, and you should complete it before entering any unrelated income amounts on your 990 form or 990-EZ. You can consult with a local tax professional about filing the 990-T return.

If you have any questions or need assistance with reporting unrelated business income on your 990 tax e-file, contact our U.S. - based customer support team at 704.839.2321, Monday through Friday from 9 a.m. to 6 p.m. EST or send a request to support@ExpressTaxExempt.com.

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Group Returns for Exempt Organizations

Exempt organizations that are considered a central or parent company can file a group return with IRS Form 990 for two or more secondary or local tax-exempt organizations.

In some cases, the IRS may require the central organization to file a 990 form for itself by submitting a separate return outside of the group filing.

Subordinate Organizations
A subordinate organization can be included in a group return only if it is

  • Affiliated with the parent organization during the time its tax period ends
  • Subject to the parent organization's general supervision or control
  • Exempt from tax under a group exemption letter that's currently in effect
  • Utilizes the same tax year period as the parent organization

Each subordinate organization must annually authorize the central organization in writing to include it within the group return. It is also responsible for declaring that the information submitted to the group is accurate and complete.

Group Exemption Number
Subordinate organizations have the option to file a separate IRS 990 return on its own; however, it must still indicate that it’s involved in a group exemption. The IRS requires a 4-digit group exemption number (GEN), and group exemption name from each organization included in a group exemption.

If there are any changes to a group exemption ruling, the parent or central organization should submit an annual information update that’s required to maintain its group exemption ruling - this is a separate form not included with your 990 filing.

Group Returns with ExpressTaxExempt
Our easy-to-use service asks for your group exemption information near the beginning of the e-filing process. If you’re the central or parent organization, you can quickly and easily list all of your subordinate organizations which we'll correctly generate on your 990 form.

For any questions or assistance with e-filing a group return, or an IRS 990 series form in general, contact our U.S -based customer support team located in Rock Hill, South Carolina. We’re available at 704.839.2321, Monday through Friday from 9 a.m. to 6 p.m. EST or reach us through email with support@ExpressTaxExempt.com.

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Tips on Reporting Other IRS Filings and Tax Compliance

Within IRS 990 and 990-EZ forms, there is a section where tax-exempt organizations can report specific types of other IRS filings and tax compliance information.

Not every question from this section may apply to your exempt group, but if it is applicable, make sure your answers are as accurate as possible.

Here are a few tips on properly reporting information for a few sections regarding any other IRS filings or tax compliance applicable to your organization.

Form 1099 or Form W-2G Tax Returns
Indicate whether your organization filed any 1099 or W-2G forms for the current tax year and the total number of returns reported if applicable. If your organization listed any gambling winnings, enter the number of IRS Form W-2Gs that you filed.

Mark if your tax-exempt group was compliant with any backup withholding rules for reportable payments to vendors and reportable gaming or gambling winnings to prize winners - these payments can include nonemployee compensation, interest, dividends, rents, royalties, commissions, broker proceeds and barter exchange transactions, or reportable gross proceeds paid to attorneys.

Unrelated Business Income
Confirm if your organization filed any income and expense details from an unrelated business with an IRS Form 990-T. Revenue from an unrelated trade or business typically gets earned from an activity that normally has nothing to do with your organization’s exempt purpose, function, or mission. If applicable, enter the same amounts that you reported on the 990-T form.

Prohibited Tax Shelter Transactions, Non-deductible Charitable Contributions, and Deductible Contributions Under Section 170(c)
Report if your organization was a party to a prohibited tax shelter transaction and filed an 8868-T form. If applicable, you’ll need to document any listed confidential transaction within section 6707(c)(2).

For tax-exempt groups with gross receipts greater than $100,000, report any fundraising requests that weren’t eligible to receive any contributions deductible as charitable contributions. Failure to indicate any nondeductible contributions can lead to a $1,000 penalty or a maximum $10,000 fee.

Organizations that received any deductible contributions under section 170(c) need to report that an IRS Form 8282 was filed about the donated property details. You’re also required to enter donor of the goods, value, and services provided, any premiums paid or received funds to pay on any personal benefit contract, and indicate whether you received a charitable gift as a qualified intellectual property that produces net income.

Foreign Financial Accounts
If applicable, report the details of any bank, securities, or other financial accounts that your exempt organization owns in foreign countries. You can report any global financial information with a FinCEN Form 114.

Indoor Tanning Services
Report if your organization received any payments for indoor tanning services during the tax year and provide an explanation if you had filed a Form 720, Quarterly Federal Excise Tax Return, to the IRS. Indoor tanning services include any service using an electronic product that utilizes one or more ultraviolet lamps intended to induce skin tanning.

As mentioned earlier, not every tax-exempt organization will need to provide this type of information - consult with a tax professional if you’re not sure which sections apply to you. With ExpressTaxExempt.com, each area is presented in simple, interview-style questions so you can input answers quickly and easily, or pass through categories that don’t apply.

Our U.S. - based customer support is ready to help with technical issues e-filing your 990 tax return to the IRS - call us at 704.839.2321, Monday through Friday from 9 a.m. the 6 p.m. EST or send a request to support@ExpressTaxExempt.com.

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5 Reasons for an IRS 990 Form Rejection

As easy as it is to submit a 990 form to the IRS electronically, there are instances when your form can get rejected. At that point, it’s up to you to figure out why the IRS rejected your return and how to correct it before incurring any penalties.

The IRS can deny your 990 form for a wide variety of reasons - each tax-exempt organization can have different financial situations. But here are five of the most common reasons your 990 tax return can get rejected.

1. Organization Hasn’t Received Exemption Status
Before filing any 990 form with the IRS, your organization must have exemption status. To apply for tax exemption, you should file either IRS Form 1023 or Form 1024. Exempt organizations usually wait a full year after receiving exemption status before filing a 990 form.

2. Tax Exempt Application is Still Pending
Even if you’ve submitted a 1023 or 1024 form, your exemption status isn’t official until you get a Determination Letter from the IRS - this will confirm your tax-exempt certification along with other pertinent information.

If the IRS requests you to file a 990 form before receiving a Determination Letter, there is an option to select a pending application. Failing to indicate this option when applicable will cause a rejection.

3. Incorrect Tax Year Periods
Your tax year period, or accounting period, must match the IRS database unless the organization terminates within the reporting tax year. Some mistake their group as operating on a calendar tax year when it’s a fiscal tax year - others think they can change their tax period simply by putting the dates they desire on the tax return.

You can find your correct tax year period dates from previous 990 forms, your exemption application form, or you can call the IRS tax-exempt hotline at 877.829.5500. If you wish to change your tax year period, you must follow the procedures mandated by the IRS.

4. Exemption Status is Automatically Revoked
Failing to file for three consecutive years results in an automatic loss of tax-exempt status. Before filing a Form 990, you must reapply for exemption status with Form 1023 or 1024 and get a Determination Letter from the IRS. You can contact the IRS directly to inquire about your status before filing.

5. Duplicate Tax Return
In some cases, the IRS may already have approved a 990 return for the tax year you’re attempting to file. You might have a CPA, tax professional, or parent company that already filed on your behalf - you’ll need to clarify that information within your organization. At the very least, you can reach the IRS and ask for the date they received the filing.

With ExpressTaxExempt.com, we automatically identify the reason for a rejected return and allow you to make corrections so you can re-transmit with no extra charges - you can also re-transmit however many times is necessary.

Our U.S. - based support team in Rock Hill, South Carolina can assist you with a rejected e-file - call us at 704.839.2321, Monday through Friday from 9 a.m to 6 p.m. EST or send a message with support@ExpressTaxExempt.com.

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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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