Form 990 Goes Digital: The Latest New IRS Demands

Under the Taxpayer First Act, nonprofits will be required to file their tax returns electronically.

Mandatory e-filing Form 990

Here’s your tax law update on e-filing for nonprofit organizations. The Taxpayer First Act, signed into law on July 1, 2019, is kicking into effect in 2020. This tax law revamps the IRS, modernizing technology and cyber security, and it has new filing requirements for nonprofits. 

Nonprofits and tax-exempt organizations now have to file all of their annual financial reports electronically. This change includes Form 990, 990-EZ, 990-PF, Form 8872, and Form 1065.

Why is the IRS Requiring E-filing for Forms 990?

As the IRS innovates, nonprofits are being bumped to the front of modern filing. This change will eliminate lags and mailing wait times, allowing the IRS to be more efficient and process returns faster.

It’s time to boost transparency.

Form 990 makes nonprofit’s records available to the public, but paper filing lags mean that by the time people get to see the data, it is often obsolete. E-filing will reduce the time between an organization submitting their records and those records being open to the public. E-filing means better communication and more current information. 

For your nonprofit, e-filing will help you have less paperwork, fewer errors, and faster filing.

When Does E-filing Form 990 Become Mandatory?

Form 990 deadlines have been extended to July 15, 2020, but the end of your organization’s tax year still determines whether you need to e-file. Nonprofits and tax-exempt organizations with tax years ending July 31, 2020, or later, are required to e-file. 

If your organization’s tax year ends June 30, 2020, or earlier, e-filing is recommended, but you can still paper file. Also, if your organization’s tax year started July 1, 2019, or any time before July 2, 2019, you can still paper file for 2020.   

For top tips on preparing for your deadline, click here.

Transitional Relief: You may have more time.

Small tax-exempt organizations filing Form 990-EZ have a special extension on paper filing to allow them to switch over smoothly. If your organization is filing 990-EZ for a tax year ending before July 31, 2020, paper filing is still an option. For tax years ending after July 31, 2021, e-filing is the only option.  

What Happens if I Still Paper File?

It is important to comply with the IRS’s e-filing requirements. If your organization’s records are not processed by the IRS for three consecutive years, you will lose your tax-exempt status. 

Which 990 Forms Are E-file Only?

Nonprofits’ financial status determines which form they file. Previously, e-filing was only mandatory for organizations with assets over $10 million and 250 or more returns.

Form 990, This is the informational tax form that tax-exempt organizations need to file annually. Now, it needs to be e-filed. There are different versions of it for different organizations. For an overview of the details for filing this form, click here.

Form 990-EZ, Smaller nonprofits with annual gross receipts less than $200,000 and total assets less than $500,000 file this form. Unlike the other forms, e-filing will not be required until 2021.

Form 990-PF, Private foundations file this form, regardless of their financial standing, and are required to e-file.

Form 8872, Political organizations will need to e-file this form for their expenditure reports. 

Form 1065, Nonprofit religious organizations, foreign partnerships, and LLCs file this form to declare financial information like profits, deductions, and losses. This is e-file only.

How Do I Switch to E-filing?

E-filing is making the IRS more efficient, and it can help your nonprofit too. Express Tax Exempt will auto-generate your 990 schedules for free and copy data from previously filed returns, so you don’t have to waste time entering the same information every year. 

Whether this is your first time e-filing or you’ve been meeting your Form 990 deadlines electronically for years, ExpressTaxExempt makes it simple. Our software will get your nonprofit through its forms quickly with step-by-step prompts. If you have questions, our customer support team is US-based, specializes in tax-exempt organizations, and is more than happy to help. 

Whether you are switching to e-filing or just looking to innovate, stay up to date with the IRS and meet your July 15 deadline with us.  

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