Filing nonprofit taxes can seem stressful, but now that your organization can file online, the entire process can be streamlined. Learn what data to prepare ahead of time to stay organized throughout the year and make the Form 990 filing process more efficient.
Practicing good nonprofit accounting all year will set your nonprofit up for success. If your nonprofit doesn’t have a dedicated accounting apartment or internal accountant, it’s still crucial to appoint at least one employee to be in charge of the tax preparation and filing process.
Keep in mind that even the best accounting consultants or tax filing software providers will require specific documents and information about your organization’s finances and tax history, so it’s important to have a team member ready to give this information.
If you’re using a third party tax filing service, here are some types of information your appointed tax employee should be familiar with:
Your appointed tax employee should know this information from their own work within the organization or should know who to contact or how to find the information. A chart of accounts can be a helpful tool to keep updated throughout the year in order to make the end of year data input more streamlined. Be sure to carve out time in your appointed employee’s schedule near the tax filing deadline for them to locate the correct documents.
Now that the nonprofit tax Form 990 can be filed completely online, your organization can easily file using a third party provider to help. Nonprofit tax providers are adept at completing annual taxes and will be able to determine which Form 990 your organization needs to complete.
Some online nonprofit tax filing providers will be able to screen your nonprofit by asking questions to determine which Form 990 you require. This means your appointed tax person should be able to answer some of the main questions like EIN, gross annual receipts, and total annual income. Depending on whether your organization is required to complete a 990-N or 990-EZ, you can potentially use an online software that provides prompts to help you complete the form.
If you are required to complete the more in-depth and total Form 990, you may need to complete a similar online assessment asking for the information, which will then be used by nonprofit accountants to complete the Form 990.
The deadlines for every organization can vary, so it’s important that your appointed tax employee is aware of the deadline. Form 990 deadlines are the fifteenth day of the fifth month after your fiscal year ends. For example, if your fiscal year ends in December, your deadline is May 15. Or, if your fiscal year ends in June, your deadline is November 15.
Missing your nonprofit tax filing deadline can result in your organization losing 501(c)(3) status. If you are late for 3 years in a row or fail to file for 3 consecutive years, your organization will lose its 501(c)(3) status and will have to refile to qualify as a tax exempt organization. If you miss the deadline, you will also have to pay a $20 fine every day until the IRS receives your Form 990, or pay the maximum penalty of $10,000 or 5% of your organization’s gross annual revenue (whichever is less).
Although strict on penalties and deadlines, the IRS is more forgiving if you ask for an extension ahead of time. If you file an online Form 8868, a request for a Form 990 deadline extension, you can get up to a 6 month extension to file your taxes. Be sure to include a reason for why you need more time to complete your Form 990 when requesting an extension, and it’s best practice not to request an extension every year.
Every 501(c)(3) organization should have an online profile on the IRS website, making it easy and more efficient to upload your documents and track your progress. Once you submit your Form 990, it’s essential to verify the receipt, and later approval, with the IRS.
Although your organization will take substantial time and effort to ensure the Form 990 has all the necessary information, it’s possible that the IRS may report the form as incomplete or as containing mistakes. In this case, your organization will have limited time to respond and resubmit the form to the IRS. It’s therefore essential that your appointed tax employee monitors every stage of submission, receipt, and approval to ensure that your organization’s Form 990 was verified by the IRS.
With the IRS’s easy online submission system, filing your nonprofit organization’s annual taxes can be simpler than ever. Be sure to choose your appointed employee far before the deadline so they have adequate time to collect all the resources they need to complete the form. Start assessing your Form 990 filers early. With the e-filers and Form 990 software, there are plenty of top providers to choose from when getting started with submitting your Form 990 online.