990-N vs. 990 EZ: What’s the Difference? [+ Top Tips]
February 10, 2021 | 990 filing | 0 Comments
Only two things are certain, or so said Benjamin Franklin: death and taxes.
Most of us do everything we can to postpone and avoid both, don’t we? Yet we know that postponing or avoiding filing nonprofit tax forms for your organization won’t make them go away. While nonprofits don’t actually pay taxes, they do 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. You certainly don’t want that!
Instead, be prepared for tax season by ensuring you understand the basics of annual filing for a tax-exempt organization. Learning the difference between the key forms, such as Form 990-N vs. 990-EZ, is a great way to familiarize yourself with the documents you’ll need to file when the time comes.
As the financial officer for your organization, you’re responsible for filing your nonprofit taxes, answering financial questions regarding donations, dues, and expenses, as well as a number of other critical tasks.
Sounds daunting? It doesn’t have to be. File 990 is the most trusted source for organizations when it comes to nonprofit tax filing, and we’re here to help you file an error-free tax form quickly and easily.
But first—research. The first step in the nonprofit tax filing process is determining which form is required of your organization. For your convenience, we’ll answer 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?
If you work for a small to mid-sized nonprofit organization, you’ve likely narrowed it down to two forms: the 990-N and the 990-EZ. And while the two share some similarities, choosing which one to file for your organization is critical.
Ready to find out more about the most common tax forms and how to ensure your organizations 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 Form 990-N, Form 990-EZ, Standard Form 990, and Form 990-PF. Although they all share the same basic function (i.e. 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, 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 e-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. The Form 990-EZ can be found here.
- 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, and it can be found here.
- 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. This form can be located here.
The first step, knowing the fiscal size of your nonprofit, more than likely answers the question of which form to use. It’s that simple! Now, depending on the form your organization requires, actually completing and submitting your documentation (with the right help) can be a relatively simple process.
How do I file the 990-N vs. 990-EZ forms?
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 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). This form is also commonly referred to as the e-postcard and can be completed online by eligible organizations.
To file the Form 990-N, you’ll need to know the following eight things:
- 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
- Confirmation that the organization’s annual gross receipts are under $50,000
- If applicable, a statement if the organization is going out of business
However, even organizations that are eligible to complete the 990-N may choose to file the traditional 990 or 990-EZ instead. In that case, it’s important to recognize that you must complete a full return, lest you fail to meet the IRS requirements for tax-exempt organizations.
The 990-EZ is considered the short-form return (as compared to the full Form 990), although it is more in-depth than the e-postcard, or 990-N. 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 e-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 the Form 990-EZ, for tax years ending after July 31, 2021, must be e-filed 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?
Part of the stress that comes with tax forms is the old adage: garbage in, garbage out. This means the form, regardless of 990-N vs. 990-EZ, is only as good as the information you put in it.
By ensuring that throughout the year your revenue, expenses, and changes in net assets are correct, the form becomes a simple plug-and-play—especially with the right tools.
However, it’s also possible that you inherited a troubled system, or are late to the party when it comes to being financially savvy for your organization. We get it. Nonprofit founders and executives tend to wear many hats. Often, their primary hat isn’t that of a financial guru.
That’s why nonprofit tax software 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.
That said, here are three tried-and-true tips to help with you file tax forms like a pro:
1. Start now.
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 2021, your due date for your IRS Form 990 would be June 15th, 2021. If your due date happens to fall on a Saturday, Sunday, or on a legal holiday, the deadline will be the next business day.
Although you won’t be able to file your Form 990 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, the Application for Extension of Time To File an Exempt Organization Return (Form 8868) is not available for the 990-N.
2. Ask for help.
Your organization may have access to more resources than you know. The only way to find out is to ask! For example, you may have donors or volunteers who are CPAs and willing to help you file. However, this task is often left to the nonprofit itself.
In that case, you might consider working with a nonprofit-specific 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 as well.
More often than not, small to mid-sized organizations are able to file their own forms (regardless of 990-N vs. 990-EZ) without the assistance of an external accountant—especially when equipped with the resources they need for success.
3. Use the right tools.
Speaking of resources, ensuring your finance team has the right tools to complete and file your return is a critical piece of the puzzle. That’s where nonprofit tax software comes in!
Software exists for a number of reasons: to make your electronic world simpler, more streamlined, and better documented. File 990 works to do all three 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.
Now that you know which form is right for your organization, it’s time to get to filing. Luckily, File 990 takes the anxiety out of the annual taxes for your organization—making sure it’s complete and error-free. That way, you can save your team’s valuable time and resources for what really matters: your mission.
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:
- Can My Nonprofit File a 990 Postcard? Still not sure if the 990-N postcard is right for your organization? Skim through this guide to find out more.
- Here’s Everything You Need to Know About the IRS 990EZ Form. This comprehensive guide to Form 990-EZ will help you navigate the filing process with ease.
- Why Should You E-File Your 990? Did you know that nonprofits are required to file their taxes electronically now? Find out how to do so quickly and easily with this guide.