Does My Nonprofit Have to Pay Taxes?
As a United States citizen, you are legally required to file your personal taxes annually; and this is regardless of your financial situation, or whether you lost or started a new job in the past year. Or, maybe you got married or divorced, or even had a child. Nonprofit taxes rules are similar, in that all tax-exempt organizations are required to file their taxes yearly. The requirements for these organizations vary, depending on your nonprofit organization’s gross assets, among other things. Of course, your organization obtained its tax-exempt status upon filing Articles of Incorporation, followed by Form 1023.
Yes, filing nonprofit taxes is similar to filing your personal taxes. But, filing nonprofit taxes can also be vastly different from filing personal taxes. For example, with your personal taxes, if you’re single, have no dependents, and only one income, then filing your taxes may be very simple and straightforward. However, nonprofit taxes can often be more difficult, and if it is a decent-sized organization, then you will need to check in with other board members and the like before filing.
In order to properly file your nonprofit taxes, you need to be able to effectively manage your tax-exempt organization’s finances. Nonprofit organizations obtain tax-exempt status in order to not have to pay taxes; if your organization is not making enough money to need to be taxed, then you should not have to pay any taxes whatsoever. Inevitably, this does require you — or your organization’s treasurer, if that is not you — to maintain a solid, workable budget.
It may also be useful to separate your nonprofit organization’s budget into unrestricted and restricted funds. Unrestricted funds can be used in any way to support the organization, while restricted funds are used for specific purposes for the organization.
Nonprofit Taxes Rules
The nonprofit taxes rules by which your nonprofit must abide are not all that complicated. Yet, it is essential to not only be familiar with them but to also understand them. And, while there are certain federal rules, be sure to also follow the nonprofit taxes rules for the state in which your nonprofit resides.
There are a number of different forms that you may need in order to file your nonprofit taxes. Make sure you know exactly which one you need to file, what you need to do to prepare, and how to file. Without knowing which form you need to file, among other logistical considerations, you will be unable to proceed.
The full Form 990 is for non-profit organizations with gross receipts greater than or equal to $200,000. Form 990-EZ, which is a much shorter version of the main form, is for nonprofits with gross receipts between $50,000 and $200,000. Then there’s Form 990-N, commonly known as an electronic postcard, which is for nonprofits with gross receipts under $50,000. Other forms, which are not nearly as common, include Form 1065 (for 501[d] organizations), Form 990-PF (for private foundations), and Form 8871 (for non-profit political organizations).
Just as important as it is to know which 990 form to file for your nonprofit, it’s equally as important to know if you’re required to file a 990 or not. Most nonprofit organizations need to file their taxes yearly, but there are exceptions, including faith-based organizations, government corporations, and essential state institutions.
Failure to file nonprofit taxes for three consecutive years will cause your non-profit organization to lose its tax-exempt status. And it can be very tedious to reinstate that tax-exempt status. More than 100 organizations lose their tax-exempt status every year, so it is more common than you might think.
It is also pivotal that you do not miss the tax filing deadline. The nonprofit taxes rules state that all tax forms are due on the 15th day of the 5th month after the end of your last calendar year, which is typically May 15th. Filing for an extension is possible, but it is not always doable.
Note: As a result of the Taxpayer First Act, enacted in July of 2019, all tax-exempt organizations must file their forms electronically, starting this year. This is a new, yet important addition to nonprofit taxes rules of which you must be cognizant.
Also, tax-exempt organizations are typically not allowed to participate in any political lobbying or to endorse any candidates. If, however, your organization has done so, then fill out a Form 5768 to explain why this has happened.
When in doubt, it never hurts to ask yourself these questions when preparing to follow the nonprofit taxes rules. Even if you are unable to file your nonprofit taxes yourself (for whatever reason), you need to make sure that you have someone you trust to take over the filing for you.
And yet, even if you are as prepared as you can possibly be when it comes time to file your nonprofit taxes, maybe the nonprofit taxes rules have changed. Maybe one or forms have been amended. Or, maybe, something drastic such as the previously-mentioned Taxpayer First Act has been announced.
How File990 Can Help you Follow the Nonprofit Taxes Rules
Nonprofit tax software File990, a certified e-filer that has been approved by the IRS, can help your organization follow the nonprofit taxes rules. In particular, File990 is a Modernized E-Filer (meF), basically meaning that File990 has been officially verified and approved by the IRS as a modern method of filing nonprofit taxes.
File990 has continued to stay ahead of the curve in providing secure, reliable, efficient e-filing services for tax-exempt organizations that enable you properly follow nonprofit taxes rules.
File990 simplifies the tax filing process for your nonprofit, with its notable confidentiality, reliability, and transparency. File990 can ensure that you follow the nonprofit taxes rules by sending your yearly reminders when it is time to file taxes for your nonprofit.
There is also File990’s Enterprise system, which is for nonprofit organizations with multiple chapters or components. The Enterprise system ensures that all aspects of the organization follow the nonprofit taxes rules.
File990 uses the highest level of security in protecting sensitive information, and an equal level of security is used when submitting your tax forms to the IRS. Forms are sent within minutes to the IRS, so you don’t have to wait for a long time to learn if your filing was successful.
Have questions or want to learn more about File990’s services? (859) 309-3641 / firstname.lastname@example.org.