Does the IRS Form 990N apply to my group?

Hi Carol,
Thanks so much for all your help in getting our Christian Homeschool Network up and running.  Things are going well so far. My husband brought a card he saw at the post office and handed it to me thinking it might apply to our group. The same basic info is on this web site: http://www.irs.gov/charities/article/0,,id=169250,00.html

It is about a new filing requirement for small tax exempt organizations.Does this apply to us? I was unsure if this was just for 501 C 3 organizations.
Thanks, Carol
Sharon W

Sharon,
The new IRS ePostcard (Form 990N) notification is for 501(c)(3) organizations. The IRS is trying to clean up its database by using this short electronic postcard. They hope to find any “dead” nonprofits that are no longer in operation. They are also looking for small nonprofits that have “grown up” to the $25,000 (now $50,000) gross revenues per year and should be filing a 990EZ or 990 Form annually.  The ePostcard is a way for small nonprofits to acknowledge that they are still under the $25,000 (nor $50,000) annual revenue threshold for filing the 990.

I recommend that you consider 501(c)(3) status ASAP.  The IRS expects nonprofits to file for 501(c)(3) tax exempt status with in 27 months of formation (incorporation as a nonprofit).  Your nonprofit incorporation date was May 27, 2008, so you have until August 2010 to apply.  Otherwise, the IRS requests an explanation of why tax exempt status was not filed earlier and tax exemption is granted to the date of filing, not back to the date of formation.  This could mean that a nonprofit might owe back income tax for the period that they were not tax exempt.

If your gross revenues stay under $5,000 a year, you are granted an exception from filing the paperwork for 501c3 status. If gross revenues get to be over $5,000 a year, your group should file for 501(c)(3) tax exempt status or pay corporate income tax on any surplus (i.e. profit).

In a nutshell, a small nonprofit has three choices:
1. Stay under $5,000 gross revenues per year
2. File for 501(c)(3) tax exempt status
3. Pay corporate income tax on any annual surplus.

I hope that helps,

Carol Topp, CPA

Update as of August 2010:

The IRS is now asking all nonprofit organizations to begin filing the Form 990N , even if they have not yet applied for tax exempt status. Here is what the IRS states on their website http://www.irs.gov/charities/article/0,,id=156389,00.html

Tax Law Compliance Before Exempt Status Is Recognized

An organization that claims tax-exempt status under section 501(a), but has not yet received an IRS letter recognizing exempt status, is generally required to file an annual exempt organization return.

The annual return is either Form 990, 990EZ or the new electronic postcard Form 990N.

The difficulty in filing the Form 990N if you have not yet received 501(c)(3) tax exempt status is that your organization is not in the IRS system. You’ll have to call the IRS and get entered into their system before you can file your 990N online.

Any wonder why many small nonprofits are not filing the 990N prior to being officially tax exempt?

Carol Topp, CPA

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My webinar is tonight Thursday, Oct 27, 2011 at 8 pm ET

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A 120 page book explaining the pros and cons of tax exempt 501c3 status. Is it needed? Is it worth it? Also covered are non profit incorporation, the application process, and how to maintain tax exempt status. Written specifically for homeschool groups.

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Does a nonprofit need to file any tax returns before they apply for tax exempt status?

I was advising a small homeschool organization about applying for tax exempt status and explained that they had 27 months after their date of formation to file an application with the IRS.

Hi Carol,

I just read this and was concerned that I would need to file something during the 27 months time frame.  Please explain if possible.
http://www.irs.gov/charities/article/0,,id=156389,00.html

Teri

Teri,

The link to the IRS website concerns IRS requirements before you apply for tax exempt status. The link above states this (in part)

Tax Law Compliance Before Exempt Status Is Recognized

An organization that claims tax-exempt status under section 501(a), but has not yet received an IRS letter recognizing exempt status, is generally required to file an annual exempt organization return.

This is a fairly new requirement from the IRS. I used to tell nonprofit organizations that if they had not yet applied for 501c3 status, they did not have to file the Form 990. It came to my attention only a week ago that the IRS wants Form 990 from all nonprofits.

Fortunately, the form your organization (and all small nonprofits with annual gross revenues of less than $50,000) would need to file is the 990N, an electronic postcard that asks about 5 questions: Name and address of organization, the principle officer’s name and check a box that your annual gross revenues are under $25,000. It is very short and would take less than 5 minutes once a year.

Here’s a blog post that answers your question. http://homeschoolcpa.com/does-new-irs-990n-apply/

I hope that helps.

Carol Topp, CPA

Reminder: Free webinar The IRS and Your Homeschool Organization is this Thursday

Reminder:

My webinar is this Thursday, Oct 27, 2011 at 8 pm ET

How to register a legal and DBA name

Hi Carol,
We have just started a homeschooling co-op this year and have already received an EIN and opened a checking account. We are the R__ville Homeschool Educational Organization, which is quite a mouthful. We are known as “D____ Academy” and would like our members to be able to write checks out to D___ Academy and have that printed on our checks.
However, when we opened our account the bank would not allow us to put D___ Academy on the checking account even though our EIN paperwork showed that our DBA was D___ Academy. We were told we needed to file for a fictitious business name. I’ve tried to do some research as to what is required to do this for our county (as it appears that is who this is filed through). However, it has just confused me more and makes me wonder if there are other filings that we need to be doing such as a business license with the county or city.
I’m trying to determine if I am on the right track or if I’m just getting worried over nothing. I want to ensure we get things set up properly so we don’t have issues later.
Any advice or guidance you may have would be much appreciated.
Angela S

Angela,

Sorry it seemed so difficult to open a simple checking account.

The bank is correct.  You should file for a fictitious business name.  Here in Ohio it is done at the state level, not the county level.  You didn’t mention what state you are in, so I can’t help much.  I had to file a one page form with Ohio’s Secretary of State (and pay $50) to register the name HomeschoolCPA as belonging to me, Carol Topp, CPA. My checking account only says Carol Topp, CPA.  But now if someone writes a check to HomeschoolCPA, I can deposit it into Carol Topp, CPA’s checking account.

There are at least 2 reasons for filing a DBA(Doing Business As) or fictitious name:

1. The citizens of your state are entitled to know who owns a business (or in your case, who runs a nonprofit  organization).  This protects us as consumers from getting ripped off.  A business owner cannot hide behind his business name.  Every business must be tied to a person or group of people.

2. The bank is also protecting its customers.  If someone found a check made out to D___ Academy, but wanted it to be deposited into Joe’s Bakery’s checking account, the bank would be suspicious that someone had stolen the D___ Academy check.

Unfortunately, the EIN is an IRS document and very easy to get, so the bank won’t put any merit in the EIN application.  The state DBA or fictitious name filing usually comes with an affidavit or some type of certificate (I got one from Ohio when I filed).

I understand your concern over other filings. It’s not easy figuring out what to do and what you might be missing.  In general you need a business license if your state requires it for your profession such as Barbers, Attorneys, Doctors, Dentists, Contractors, Insurance Brokers, Opticians, Veterinarians.  For example, as a CPA I am licensed in Ohio. Nonprofit groups do not usually need a business license.

Nonprofit organizations may need a vendors license if they are selling merchandise and then they may owe sales tax too.  It varies by each state. For example, here in Ohio we can sell merchandise 4 days a year and not have to collect sales tax. In Indiana, they can sell 30 days a year and not bother with collecting sales tax.

This website is very helpful for determining the nonprofit requirements by state: Hurwit Associates Nonprofit Library
Use the State-by-State Filings on the left column.

I hope that helps!
Carol Topp, CPA

What do you think of this bad review?

This review is from: Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out (Paperback)

It’s a good starting point but it often refers to her website or other publications. The title announces a how-to book and since she is a cpa I was expecting “pure” legal advice – there are too many references to the Bible which is not necessary for the purpose of the book and frankly, becomes annoying. I have nothing against Christianity since I was raised as a Christian, but the subject of the book has nothing to do with the Bible.

HomeschoolCPA.com

Free webinar: The IRS and Your Homeschool Organization

 

 

 

Advice for first year director

Advice for first year Executive Director from Jerry Sinclair, President of Faithful and True of Jacksonville, Inc.

1. Never stop prospecting for new donors or new volunteers

2. Keep an eye on the finances. I have a treasurer, but I am still responsible for the financial health of the charity.

3. Communicate, communicate, communicate Keep your board informed.

4. Inspect what you expect. If you ask anyone (paid staff or volunteer) to do a task, quietly check to make sure it is done properly.

5. While staying humble, be confident when doing the right thing. Your integrity will be tested more often than in the for-profit world.

6. Don’t be afraid or ashamed to ask for help. It is far worse to tackle a problem the wrong way in ignorance. Better to admit up front if you are in need of help.

7. Keep the charity mission statement at the forefront of everything you do. Make it a habit to review all of your tasks and directives to make sure they are within the mission statement guidelines.

8. Be prepared to say NO early and often. You and your charity may be asked to do some good things, but it may be outside the DNA of your charity’s ability or staffing resource.

9. Make staff and board meetings timely, efficient and as short as possible.

10. Have FUN!

So many of these suggestions apply to homeschool leaders too!