Every congregation knows their place of worship is special. The IRS knows this too! For that reason, there are special tax laws in place that apply specifically to churches and religious organizations.
Continue reading to learn more about this:
How does the IRS define a church?
The IRS uses the term “church” as a broad recognition of places of worship, such as temples and mosques, associations of churches, conventions of churches, and integrated auxiliaries. Churches are considered public charities. These religious organizations hold a huge variety of spiritual values and religious affiliations, but when it comes to taxes, they are all exempt. The IRS also extends tax-exempt status to conventions, associations, auxiliaries, and other organizations that are associated with churches.
Does my church need to file Form 990?
Filing Form 990 for churches is optional. Under section 501(c)(3), churches are recognized as tax-exempt; they do not need to apply for tax-exempt status. Thus, churches are automatically considered tax-exempt, meaning they are not required to file Form 990 to maintain their tax-exempt status.
Complying with 501(c)(3) Exemption Status
Filing Form 990-T
Even though churches are recognized as tax-exempt, they still may be liable for tax on unrelated business income. The IRS defines unrelated business income as, income from a trade or business, regularly carried on, that is not substantially related to the charitable, education, or other purpose that is the basis of the organization’s exemption.”
A church that has $1,000 or more of gross income from an unrelated business must file Form 990-T,Exempt Organizations Business Income Tax Return, for that year. ExpressTaxExempt supports e-filing for Form 990-T.
Whether churches file Form 990 or not, there are a few ways they can lose tax-exempt privileges. When it comes to politics and candidates, churches cannot devote too much money or influence towards legislation or elections and also remain tax-exempt.
Benefits of Filing Form 990
Although it is not required, many churches choose to file Form 990. Opening up your church’s financial records to your community is a great way to enhance transparency.
Filing Form 990 allows your contributors and congregation a tangible look at how the church is using your donations. This is also proof that those contributions are tax-deductible.
Filing Form 990 is also a way to assure church leaders, members, and contributors that the church is recognized as exempt and qualifies for related tax benefits.
Still unsure if you should file? ExpressTaxExempt is here to help!
ExpressTaxExempt is an IRS-authorized e-file provider that makes the process of filing 990 series returns quick and easy. Along with several amazing filing features, ExpressTaxExempt also has a live customer support team that will help you through every step of the filing process via phone, email, or chat.
Learn more about the benefits of filing for your church today at ExpressTaxExempt!