Posted by Don Bell Law

Not for Profit Taxes

Not for Profit Taxes

The non-profit status may make an organization eligible for certain benefits, such as exemptions on state sales, property tax, and income; however, this corporate status does not automatically grant exemption from federal income tax. To be tax-exempt, most organizations must seek recognition from the Internal Revenue Service for the exemption to obtain a resolution or ruling letter recognizing the tax exemption.

Suppose you intend to apply to the IRS for the tax-exempt federal state to be recognized as a charity under section 501(c)(3) of the IRS Code. In that case, your article of incorporation must contain certain provisions. For more information, talk to a professional lawyer.

To be exempt under section 501 (c)(3) from the date of creation, an organization must apply within twenty-seven months of the end of the month in which it was created.

While some organizations are not required to apply for exemption recognition, many do so to clarify their tax situation. User fees must accompany a request for exemption. The IRS will not process a request until the user fees are paid.

What does it mean to be a Not for Profit?

Not for profits are types of organizations that do not generate profits for their owners. Any money earned or donated to a non-profit organization is used to promote the organization's goals and keep it running. Public service organizations and, as such, are not required to pay most taxes. In a not for profit organization, the income is not distributed to group members, directors, or officers. There are also non-profit companies called companies without capital. Some well-known non-profit organizations include the American Red Cross, United Way, and The Salvation Army.

Do Not for Profits File Income Tax Returns?

Several tax-exempt corporations are required to file annual tax returns with the IRS. Although most tax-exempt nonprofits do not pay federal taxes (this means "tax exemption"), most must file a tax return with the IRS. This annual report is called Form 990.

What is IRS Form 990?

IRS Form 990 is the return form that many tax-exempt federal corporations must file with the Internal Revenue Service yearly. The firm 990 allows the IRS and the general public to assess a non-profit organization's operations, including information about the non-profit organization's mission, programs, and finances.

Form 990 that an organization should file depends on the filing year and the organization's gross revenue. Different forms include 990, 990-EZ, and 990-N forms.

Who submits IRS Form 990? What does Form 990 represent?

With a few exceptions, most federal tax-exempt organizations, such as churches and state institutions, file a Form 990. All private foundations file a Form 990.

The Internal Revenue Service provides information to help you determine which form to submit. 

  • Larger non-profits with gross revenues over $ 50,000 are expected to file a Form 990 or 990-EZ

  • Small non-profit organizations with a gross income of less than $ 50,000 files a Form 990-N 

  • Private Foundations files Form 990-PF.

Talk to an experienced tax advisor to find more information on the forms to send.

Which non-profit organizations are exempt from completing IRS Form 990?

Not all non-profit organizations are required to file annual returns. You generally do not need to complete Form 990 for the following:

  • Branches of other non-profit organizations: those that may be covered by a group declaration submitted by the parent organization

  • State institutions that provide essential services.

  • Many government institutions 

  • Most religious organizations, religious schools, missions, or missionary organizations

It is crucial to check with the IRS to decide if your organization should file a refund.


When is your IRS Form 990 Expires?

Your organization's Form 990 expires on the fifteenth day of the fifth month following your fiscal year-end. This implies that if your organization follows the calendar year (January 1 to December 31), Form 990 expires on May 15 every year.

What if your not for profit organization does not file an IRS Form 990?

If an organization has not filed a Form 990 for three consecutive years, the IRS will automatically revoke its tax-exempt status. Since 2011, more than 500,000 non-profits across the country have automatically lost their tax-exempt status for this reason. 

The IRS does not have an appeal process for automatic revocation due to failing to file a suitable Form 990 for three years. Without this standing, your organization could be subject to income tax. Additionally, you can avoid paying user fees and submitting additional documents to the IRS by submitting Form 990 each year.



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