What is IRS Filing 990-N?
990-N Detailed Overview
While nonprofits with 501(c)(3) tax exemption status might not pay federal taxes, they still must file their nonprofit’s IRS Tax Form 990 or Form 990-N for nonprofit organizations. Filing this form ensures that nonprofits conduct their charity business in a way that complies with their public nonprofit responsibilities. In addition, filing the IRS 990 Form provides the IRS with an overview of your activities throughout the last fiscal year. Filing IRS Form 990 also provides transparency to current and potential donors, as IRS Form 990 helps donors understand how your nonprofit Organization operates and is managed.
There are five versions of the IRS Nonprofit Form 990. The 990-N allows organizations with less than $50,000 in gross revenue to qualify to file Form 990-N. The IRS sometimes refers to 990-N as the e-Postcard. The 990-N is the most basic report for organizations, but there are better choices than the 990-N.
Only tax-exempt organizations with less than $50,000/year in annual revenue receipts can submit Form 990-N. However, there are a few exceptions for newer organizations. It’s essential to ensure your Organization meets these criteria before filing the 990-N.
Your Organization can file the 990-N if it:
- It has existed for one (1) year or less and is reporting less than $75,000 in revenue.
- It has existed for 1-3 years and is reporting less than $60,000 in revenue.
- Exists for 3+ years and has reported less than an average of $50,000 in annual revenue over the most recent three (3) years (including the current year)
What information is needed to complete 990-N?
The information included on Form 990-N includes:
- The legal name of the Organization
- Provide all registered trade names, DBA, or Doing Business As.
- The current Mailing address of the Organization
- Name and address of the principal officer
- Whether or not the Organization is still operating
- Federal Employee ID Number (EIN)
- Attestation from the authorized officer that the Organization meets the requirements (Less than $50,000 or less in gross receipts.
- If applicable, provide a statement of whether the Organization has been dissolved/terminated or is in the process.
Why Filing the 990-N is Crucial
- Why Filing the 990-N is Crucial: maintaining Tax-Exempt Status Failure to file the 990-N for three consecutive years can automatically revoke a nonprofit’s tax-exempt status. Losing the 501(c)(3) designation can devastate small organizations that rely on donations and grants. This underscores the critical importance of timely and accurate filing. Transparency and Accountability: Filing the 990-N enhances transparency and accountability, demonstrating to donors, funders, and the public that the Organization is adhering to regulations and, therefore, building trust and support from the community.
- Avoiding Penalties: Nonprofits that miss the filing deadline may face penalties and fees, which can strain their limited resources. Timely filing helps organizations avoid these extra costs.
- Access to Funding Opportunities: Many grant-making organizations require proof of compliance with IRS filing requirements. Having an up to date 990-N is often a prerequisite for accessing valuable funding opportunities.
- Improving Organizational Management: Preparing to file the 990-N encourages nonprofits to maintain accurate and transparent financial records, ultimately strengthening their financial management.
Can we file the 990-N ourselves?
Yes, the 990-N is straightforward to complete on your own. We understand that the process may seem daunting, but we assure you it’s more straightforward than it appears. However, we have shared a few reasons to consider outsourcing to a tax or accounting professional, such as a 501(c)(3) Center.
- The first step is registering and creating a login with the IRS, which requires an ID verification process. Once you have your login credentials, you can proceed with filing.
- It’s reasonable that a nonprofit could handle filing Form 990-N on its own. However, if you have a third-party tax professional, you can enjoy the peace of mind of knowing the filing is complete.
- The cost to outsource is remarkably low, generally between $100 and $300. This affordability ensures that even nonprofits with limited resources can benefit from professional assistance, providing a sense of financial security. 501(c)(3) Center is $200.
- Ensure it’s done correctly and not put your tax-exempt status at risk.
- We see a lot of board turnover, and the 990-N fails to get filed. If this happens for three consecutive years, it often results in losing 501(C)(3) status. We want to make sure you’re aware of this risk so you can take the necessary precautions.
If the process is straightforward, why should I hire a 501(c)(3) Center?
Filing with 501(c)(3) Center provides peace of mind. Here are some additional reasons to partner with 501(c)(3) Center to file your 990-N.
- The professional team oversees the process to ensure completeness.
- Our technology will file directly with the IRS. You don’t need to sign up; review the verification process and monitor with the IRS.
- Our team reviews your other compliance needs and brings any deficiency to your attention.
- Confirm filing receipt with the IRS.
- It’s a small price and lets you focus on other things. We will have it done quickly and efficiently.
Summary
Filing the 990-N is not just a regulatory obligation for small nonprofit organizations but a vital component of sustainable operation and growth. By staying compliant, these organizations can safeguard their tax-exempt status, increase transparency, avoid penalties, access funding opportunities, and enhance their financial management practices. Small nonprofits must treat this obligation with the seriousness it deserves to ensure their mission continues to thrive.