Nonprofit organizations are vital to our communities, and tax professionals are indispensable advisors to them. Although many nonprofits enjoy tax-exempt status, they still often must file annual information returns with the IRS.

Whether you’re advising these organizations as a tax professional or working within one, staying ahead of due dates and understanding key items is crucial. We will explore the filing deadlines, key items of interest and best practices for working with nonprofit organizations.

Filing deadlines

One of the primary responsibilities of tax professionals working with nonprofits is managing deadlines. Nonprofits have specific filing requirements and due dates that vary based on their year-end.

Form 990 filing deadline:

For most tax-exempt organizations operating on a calendar year, Form 990 is typically due by May 15. Which Form 990 an organization needs to file generally depends on its financial activity. For those on a fiscal year, the deadline falls on the 15th day of the fifth month after the close of the fiscal year. Timely submission is crucial to avoid penalties and maintain tax-exempt status.

Which Form 990 do exempt organizations file?
Status	Form to file
Annual gross receipts normally ≤ 50,000	990-N (e-Postcard) Organizations eligible to file the e-Postcard may choose to file a: 990, Return of Organization Exempt from Income Tax or 990-EZ, Short Form Return of Organization Exempt from Income Tax
Annual gross receipts < $200,000, and total assets < $500,000	990-EZ or 990
Annual gross receipts ≥ $200,000, or total assets ≥ $500,000	990
Private foundation – regardless of financial status	990-PF, Return of Private Foundation

Extensions and exceptions

An extension can be requested if a nonprofit needs more time to file. Form 990, 990-EZ, 990-PF and 990-N are due on the 15th day of the fifth month after the organization’s year-end (May 15 for calendar year organizations). A six-month automatic extension of time can be granted by filing Form 8868, Application for Extension of Time To File an Exempt Organization Return. Form 990-N is not eligible for an extension of time to file.

However, it’s important to note that an extension for filing does not extend the time to pay any taxes due. Tax professionals should ensure clients understand the extension process and its associated implications.

Key items of interest for tax professionals

Beyond deadlines, several specific issues require careful attention when advising nonprofit organizations.

Maintaining tax-exempt status

• IRS compliance requirements: Nonprofits must adhere to strict IRS guidelines. This includes operating exclusively for exempt purposes and avoiding excessive political or lobbying activities. Regularly reviewing organizational activities helps ensure compliance and minimizes the risks of revocation.

• Documentation and record keeping: Thorough documentation of activities, donations and expenditures is essential for compliance and critical in the event of an audit. Tax professionals should advise nonprofits on best practices for maintaining records that support their IRS filings and organizational missions.

Unrelated business income (UBI)

UBI is income from activities unrelated to the organization’s core exempt purpose is subject to taxation. Tax professionals need to work closely with nonprofits to identify any potential UBI, calculate the tax correctly and understand any applicable deductions.

Generally, unrelated business taxable income (UBTI) is gross income from a trade or business, regularly carried on, less the deductions allowed, which are directly connected with the trade or business but not substantially related to the organization’s exempt purpose.

An exempt organization with $1,000 or more of gross income from an unrelated business must file Form 990-T, Exempt Organization Business Income Tax Return (and proxy tax under section 6033(e). If the organization expects its annual tax to be $500 or more, quarterly estimated tax must also be paid. Form 990-W, Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations, is the worksheet that can be used to calculate the amount of estimated tax payments required. The requirement to file Form 990-T is in addition to the obligation to file the annual information return.

Risk management

Engaging in unrelated business activities can jeopardize a nonprofit’s tax-exempt status if they become a substantial part of its overall operations. Regular assessments and strategic planning can help mitigate these risks.

Donor contributions and fundraising compliance

• Acknowledgment requirements: Nonprofits must provide proper documentation for donations, which is essential for donor tax deductions and compliance. Tax professionals can assist in establishing systems to track contributions accurately and issue timely acknowledgment letters.

• IRS reporting standards: Fundraising activities must be reported accurately on tax forms. Ensuring that all fundraising events are recorded correctly is a critical area of focus.

Best practices for tax professionals

• Develop a comprehensive tax calendar

  Maintain a detailed calendar of all federal, state, and local filing deadlines. This includes Form 990, payroll taxes, UBI filings, and other required filings.

• Conduct regular reviews

  Periodically review the nonprofit’s activities and financial records to ensure ongoing compliance. Internal audits can help identify issues early, preventing potential complications during an IRS audit.

• Educate and communicate

  Ensure that the nonprofit board and staff understand the importance of timely and accurate tax filings. Clear communication can foster a culture of compliance and make it easier to implement necessary changes.

• Invest in training and technology

  Utilize the latest accounting software and invest in regular training to stay current with evolving tax laws and compliance requirements. A well-informed team can prevent costly mistakes and safeguard the organization’s tax-exempt status.

Tax professionals can call the IRS Tax Exempt and Government Entities Customer Account Services at 877-829-5500 (toll-free number) for answers to questions about charities and other non-profit organizations.

For more information on this topic, check out our Preparing Form 990 for Tax Exempt Organizations On-Demand Webinar.