One of the most significant duties your nonprofit’s staff has is maintaining your organization’s tax-exempt status. To do so, they have to complete tax forms each year. And failing to file can cause you to owe steep fines to the IRS and potentially lose tax-exempt status for your organization, which is a huge setback for your financial goals.
The best way to prepare for tax season is by ensuring you understand the basics of annual filing for a tax-exempt organization. Learning the difference between the key tax forms, such as Form 990-N and 990-EZ, is a great way to familiarize yourself with the documents you’ll need to file when the time comes. We’ll satisfy your curiosity by answering the following questions in this guide:
- What are the main types of nonprofit tax forms?
- How do I file the 990-N vs. 990-EZ forms?
- How can I eliminate anxiety surrounding nonprofit taxes?
Ready to find out what the difference is between these forms and how to ensure your organization stays up-to-par with the right documents? Let’s get started!
What are the main types of nonprofit tax forms?
The four common variations of the IRS Form 990 are the standard Form 990, Form 990-N, Form 990-EZ, and Form 990-PF. Although they all share the same basic function of ensuring financial transparency and accountability, there are a few key differences in these forms and the organizations that file them. Let’s look into each type of form based on the financial size and organizational makeup of your tax-exempt nonprofit:
- Form 990-N: Form 990-N, also known as the e-postcard or simply postcard, is the IRS’s electronic form for tax-exempt organizations with annual gross receipts less than $50,000. The 990-N is only available online, meaning that eligible nonprofits must file their forms electronically.
- Form 990-EZ: The next step up from the postcard is the Form 990-EZ. This is the IRS form required for midsized tax-exempt organizations with annual gross receipts between $50,000 and $200,000. However, organizations that are eligible for the 990-EZ may choose to file a full return (Form 990) instead.
- Form 990: Form 990 is the IRS form required for larger tax-exempt organizations with annual gross receipts over $200,000 or total assets over $500,000. This is the longest form that requires the most detailed information to complete.
- Form 990-PF: Form 990-PF is the form completed by all private foundations, regardless of their financial status. Organizations that might complete this form include Section 4947(a)(1) nonexempt charitable trusts and Section 501(c)(3) tax-exempt private foundations.
The main difference between Form 990-N and Form 990-EZ is their comprehensiveness. For example, Form 990EZ requires nonprofits to report detailed information like their revenue and expenses, liabilities, compensation, and program achievements, while Form 990N requires simple data from nonprofits, like their EIN and contact information.
Knowing the fiscal size of your nonprofit likely tells you which form to use. Depending on the form your organization requires, actually completing and submitting your documentation can be a relatively simple process with the right resources.
As this guide is aimed at small-to-mid-sized nonprofits, we’ll be focusing on Forms 990-N and 990-EZ going forward.
Filing Form 990-N vs Form 990-EZ: What's the difference?
Now you know that your organization has less than $200,000 in gross receipts, you’ll likely be filing the 990-N or the 990-EZ. Yet even between these two smaller versions of the form, there are several key differences in the filing process and requirements. Let’s take a look at the main differences between filing the 990-N and the 990-EZ, as well as the basic process for each:
Form 990-N
Form 990-N is the simplest nonprofit tax form, and as such, it is available only for the smallest of tax-exempt nonprofits (those with gross receipts less than $50,000). The 990-N postcard can be completed online by eligible organizations. To file Form 990-N, you’ll need to have the following eight pieces of information:
- Your nonprofit’s Employer Identification Number (EIN) and the organization’s Taxpayer Identification Number (TIN)
- The tax year you are filing
- The legal name and mailing address for the organization
- Any other names the organization may use
- The name and address of the principal officer
- The URL for the organization’s website
- Confirmation that the organization’s annual gross receipts are under $50,000
- If applicable, a statement if the organization has gone out of business or is going out of business
However, even organizations that are eligible to complete the 990-N may choose to file the full Form 990 or 990-EZ instead. This may be because grantmakers require more detailed forms, or because some nonprofits simply want to increase their financial transparency.
Form 990-EZ
The 990-EZ is considered the short-form return (as compared to the full Form 990), although it is more in-depth than the 990-N postcard. This four-page return is required of organizations with annual gross receipts between $50,000 and $200,000. Keep in mind, if your nonprofit has grown its revenues, this may be the year to switch up from the easier postcard to the 990-EZ.
Although organizations have been able to file paper forms in the past, the Taxpayer First Act of 2019 states that Form 990-EZ, for tax years ending after July 31, 2021, must be filed electronically going forward.
In addition to the basic information that you’d need for the 990-N (listed above), you’ll also need the following to file your Form 990-EZ:
- Revenue, expenses, and changes in net assets or fund balances
- Balance sheets
- Statement of program service accomplishments
- List of officers, directors, trustees, and key employees
- Itemization of grants received, if applicable
For both the 990-N and the 990-EZ, we suggest the first step you take be investing in a comprehensive nonprofit tax software solution. For example, File 990 can take stress and procrastination out of the tax process by being a reliable, knowledgeable partner for your tax-exempt organization.
How can I eliminate anxiety surrounding nonprofit taxes?
Tax filing can be a daunting tax even for veteran nonprofit financial officers. But keeping a clear head is crucial to making the nonprofit tax filing process efficient and effortless. By ensuring that throughout the year your revenue, expenses, and changes in net assets are correct, the form becomes a simple plug-and-play—but only with the right tools and these four best practices:
1. Keep detailed records.
Ensure you’re using software to maintain your data hygiene habits, such as:
- Accounting software
- A CRM
- Nonprofit tax filing software, like File 990
That’s why nonprofit tax software, such as File 990, is indispensable for tax-exempt organizations. With File 990’s help, you’ll not only be sure you’re using the right form (i.e. choosing 990-N vs. 990-EZ), but that your information is correct, complete, and on time.
2. Don’t procrastinate.
Filing sooner rather than later helps eliminate surprises and ensures you complete the process prior to your deadline. The IRS Form 990 (regardless of the variation you file) is due every year by the 15th day of the 5th month after the close of your tax year.
For example, if your fiscal year ended in January of 2023, your due date for your IRS Form 990 would be June 15th, 2023. If your due date happens to fall on a Saturday, Sunday, or on a government holiday, the deadline will be the next business day.
Although you won’t be able to file your tax forms until after your tax year ends, it’s a good idea to get your finances in order beforehand to make the filing process as simple as possible when the time arrives.
Meanwhile, if your filing deadline is quickly approaching and you’ve yet to complete your Form 990, Form 990-EZ, or Form 990-PF, you can request an automatic six-month extension with Form 8868. However, this form is not available for the 990-N postcard.
3. Ask for help.
Your organization may have access to more resources than you know. The only way to find out is to ask! Here are some ways you can ask for help during the filing process:
- Ask your community. You may have donors or volunteers who are CPAs and willing to help you file. Send out an appeal to your supporters asking if anyone is interested in helping you with your tax forms. They might even do it pro-bono due to their existing connection to your organization!
- Outsource the work to a consultant or accounting firm. These individuals can supplement where you’re lacking in financial strategy and ensure your organization can file your tax forms correctly and with ease. However, they often do come with a hefty price tag.
- File yourself. Small to mid-sized organizations are usually able to file their own forms without the assistance of an external accountant—especially when equipped with the resources they need for success.
As a nonprofit professional, you have a lot on your plate already. Plan your approach to your tax season well in advance to prevent a hectic experience down the line. Don’t forget to have a backup plan if your first or second choices for filing fall through the cracks so you aren’t scrambling.
4. Use the right tools.
Ensuring your finance team has the right tools to complete and file your return is crucial to filing successfully. That’s where nonprofit tax software comes in.
There are many options on the market, but we recommend File 990. It works to make your tax journey more streamlined and is designed specifically for tax filing assistance for small to mid-sized nonprofits. All you need to get started is your organization’s Employer Identification Number (or EIN), and our tax software automatically pulls relevant information from the IRS database. Even better, we’ll carry your nonprofit’s data over from year to year, effectively minimizing the information you’ll need to gather manually.
By investing in a tax software solution and e-filing your Form 990-N or 990-EZ on your own, you can save hundreds (or thousands) of dollars that you would otherwise have spent on outsourcing to an accounting firm.
Wrapping Up
Now that you know the nuances of Forms 990-EZ and 990-N and which is right for your organization, it’s time to get to filing. Remember, File 990 takes the anxiety and errors out of the annual taxes for your organization. That way, you can save your team’s valuable time and resources for what really matters: achieving your mission.
Additional Resources
For more information on nonprofit taxes, effective e-filing practices, and choosing the right form for your organization, be sure to check out our other educational resources:
- An Ultimate Guide to the 990-N Postcard for Small Nonprofits. Still not sure if the 990-N postcard is right for your organization? Skim through this guide to find out more.
- 990-EZ for Nonprofits | Everything You Need to Know to File. This comprehensive guide to Form 990-EZ will help you navigate the filing process with ease.
- The IRS Form 990-EZ Deadline & What Happens When You Miss It. There can be significant penalties for filing your Form 990 variants late. Learn about filing deadlines here so you never miss them.
