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How a 501 (c) (3)’s Tax Filing Differs from Other Nonprofits

It’s important for you to know whether your nonprofit organization must pay taxes, as well as what steps to take when filing with the Internal Revenue Service.

If you’re running a charitable organization, a private foundation, or a private operating foundation, chances are you fall under the 501 (c) (3) category, and will file some variation of a 990 tax exempt form.

However, there are a lot of non-profit categories, and this can make filing taxes a bit confusing.

First things first . . .

Even if your organization is a tax-exempt 501 (c) (3), you still must file once per tax year. If you skip out on filing, you’re in danger of losing your tax-exempt status.

So file. Every time.

That said, you always want to make sure you’re filing the correct paperwork.

And even if you are adept at tax filing, with a clear handle on how your nonprofit operates, it’s always useful to understand how one organization differs from another.

What if you ever find yourself managing a credit union?

What if you’re part of a group return?

What if your organization is a political or religious one?

What if you want to register as a type of 501 nonprofit other than 501 (c) (3)?

These are important questions to hash out before taxes come due, and while the IRS provides information on all this, there’s a lot to parse through.

File990 wants to help your nonprofit figure out its place in the world of tax filing. Let’s talk a bit more about How 501 (c) (3) Tax Filing Differs from Other Nonprofits.

Let’s Talk Politics

One thing that you must understand about nonprofits is how the IRS views your political involvement.

According to the IRS’s Internal Revenue Code:

“. . . all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.”

Specifically, your nonprofit can’t:

  • Contribute to a political campaign fund
  • Make a verbal statement on behalf of your organization supporting a political campaign
  • Make a written statement supporting a political campaign
  • Contribute to or make a statement opposing any political campaign

You can, however, perform some non-partisan political activities as a 501 (c) (3), such as:

  • Publishing educational voter guides that don’t favor or oppose a candidate or party
  • Presenting a non-partisan educational public forum for voters
  • Voter registration initiatives
  • “Get out the vote” drives

The minute you participate in supporting or opposing politicians and affiliated political parties, you no longer qualify as a tax-exempt nonprofit organization.

If unintentional, that’s something you want to avoid at all costs.

However, if you’re purposefully participating in partisan political activities—such as running a campaign committee or political action committee—you shouldn’t present yourself as a 501 (c) (3) under IRS code.

These conditions make you what’s called a Section 527 political organization.

Basically, that means you have to pay taxes by filing the Form 8827 and following other stipulations.

While some people say talking politics in the workplace is a bad idea, it’s a necessary conversation for a nonprofit to have. Political organizations are valid if they follow the rules, but they must pay taxes.

Want to keep your tax-exempt status? Play it safe.

Keep things non-partisan and within the boundaries of IRS code.

Who Files an IRS Form 990?

A 501 (c) (3) nonprofit will always file a 990—either a 990-EZ, 990-N Postcard, 990-PF (private foundation), or full 990 form, depending on their total gross receipts for the tax year.

Many other 501 and nonprofit organizations file a 990. Often, it just depends on registering your organization correctly and then following the IRS instructions for filing.

Example: Say you want to start a social organization, like a sports league or a hobby group, and you want it to be considered a nonprofit.

You’d file a form 1024 with the IRS to be designated a 501 (c) (7).

However, you’d still be eligible to file a 990 or 990-EZ, depending on your organization’s revenue.

Many types of nonprofits file a 990 form:

  • Holding corporations for tax-exempt organizations
  • 501 (c) (3) private foundations and public charities
  • Civic leagues and social welfare programs
  • Labor and agricultural groups
  • Business leagues, chambers of commerce, and real estate boards
  • Fraternal associations
  • Credit Unions
  • Social clubs
  • Cemetery companies
  • Teacher’s retirement fund associations
  • Many others

As you can see, there are plenty of different ways for a nonprofit to file  as tax exempt with form 990.

How Do You Know Not to File a Form 990?

There are certain instances where you don’t file a typical 990, or you file a different form entirely.

Here are a few examples:

  • You’re a religious or apostolic association, or a communal religious community, who falls under code 501 (d), and must file tax form 1065.
  • You’re a black lung benefit trust and must file a special 990-BL form
  • You’re a farmer’s cooperative association and must file a 990-C.
  • You’re a private foundation who files a 990-PF.

You also don’t file a 990 if you’re one of the following:

  • U.S. Government instrumentality
  • Group legal services plan
  • Pre-1880 Armed Forces group
  • ERISA sec. 4049 trust
  • Qualified tuition program
  • Split-interest trust
  • Charitable trust treated as a private foundation

We realize that this is a ton of information to digest.

Chances are, unless you’re already a tax whiz, this stuff can quickly make your head start spinning.

We get it. And we want to help.

If you still have questions about how and when to file an IRS form 990, 990-EZ, or 990-N postcard, or other questions about nonprofit status, get in touch with File990.

Whether you’re a well-established, multi-organizational nonprofit, or you’re just starting to cobble together a new charter, knowledge is power.

File990 is considered an industry leader in 990-EZ and 990-N electronic tax filing for tax-exempt nonprofits.

If you qualify to file either of these forms, we want nothing more than to help make your filing fast and easy.

See what we offer here.