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 [email protected].