Does a Nonprofit Need to File Any Tax Returns Before They Apply for Tax Exempt Status?

 

Does a nonprofit need to file a tax return before they receive tax exempt status?  Yes, the IRS requires organizations to file information returns before they apply for tax exempt status.

Here’s what the IRS website states:

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.

So the answer is YES, you need to file either tax returns (and pay tax!) or information returns before you are granted tax exempt status.

In this short podcast episode (14 minutes)  Carol Topp, the HomeschoolCPA, will explain this very confusing requirement.

 

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Have more questions about your homeschool organization’s tax exempt status? My book, The IRS and Your Homeschool Organization would be a big help.

The IRS and Your Homeschool Organization

Does your homeschool group need to pay taxes? Could they avoid paying taxes by being a 501c3 tax exempt organization? Do you know the pros and cons of 501c3 status? Do you know what 501c3 status could mean for your homeschool group?

I have the answers for you in my book The IRS and Your Homeschool Organization. The information I share in my book has been helpful to homeschool support groups, co-ops, music and sports groups and will help you understand:

  • The benefits of 501c3 status
  • The disadvantages too!
  • What it takes to make the IRS happy
  • What your state requires
  • Why your organization should consider becoming a nonprofit corporation
  • What is the difference between nonprofit incorporation and tax exemption
  • IRS requirements after you are tax exempt

Carol Topp, CPA

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How to file the IRS Form 990-N video

 

 

Steve from Nonprofit Ally created a short (6 minute) video) of how to file your Form 990-N Annual Information Return for tax exempt organizations. What the IRS calls the ePostcard.

 

It’s nice of Steve to create this video so you know what information you need and what the IRS will ask.

My pet peeve: Steve calls it “filing your nonprofit taxes.” The Form 990-N is not a tax form. The Form 990 is called an information return because tax exempt nonprofits don’t file tax returns.* They are exempt from taxes.

Actually the IRS calls the 990-N a Notice because all you’re really doing is notifying the IRS that your small tax exempt organization still exists.

But that’s just me being a picky, precise CPA.

Carol Topp, CPA

*Some tax exempt organizations with unrelated business income may pay taxes on their unrelated income.

What Homeschool Leaders Don’t Know About IRS Annual Reports

 

What Homeschool Leaders Don’t Know About IRS Annual Reports

Carol Topp, CPA, the HomeschoolCPA will share tips on important issues that homeschool leaders may not know about the IRS Annual Reports. This episode will focus on helping homeschool leaders understand a report that the IRS requires from all tax exempt organizations–including your group! It’s called the Form 990.

Listen to the podcast

Carol Topp, CPA can help with:

Preparation of IRS Annual Return

Preparing the Form 990/990-EZ Annual Information Return for the IRS and your state. The Form 990/990-EZ is due 4 1/2 months after the end of your fiscal year.

This service involves several telephone calls and e-mails and copy of your financial statements (a QuickBooks file is preferred).

I also offer a service I call “Buying Peace of Mind”

This is a a review of IRS forms you have prepared yourself. You can save money by doing much of the work yourself. I will review Forms 1023 or Annual Form 990/990-EZ and offer my opinion and advice.

___________________________________________

Wow Carol!  Thanks so much – just the info you provided here is very helpful.  I look forward to speaking with you as I’m anxious to get started, but I want to do so in the best and most efficient way.  This is new territory for me – so I truly appreciate your guidance!

-Laine Discepoli, Glendale, OH

________________________________________

 

Click Here to request more information!

 

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IRS 990-N down until January 6 2017

The IRS has announced that their Form 990-N, the ePostcard, online filing system will be will be down from December 26, 2016 at 11:59 a.m. until January 6, 2017 at 1:00 p.m. EST due to an annual planned maintenance.

The IRS apologizes for any inconvenience.

The Form 990-N is due 4 1/2 months after the end of your organization’s fiscal year. Many homeschool groups have fiscal years that end on June 30 or July 31, so their 990-Ns were due November 15 and December 15, respectively.


Don’t know what I’m talking about or what an Form 990-N is? Read my 990-N FAQ page.

What’s a 990-N?

Since 2010, the IRS has required all nonprofit organizations file an annual information return. (All means all except churches) The IRS Form 990-N is a simple, online form that all nonprofit organizations with annual gross revenues of less than $50,000 must file every year. That means your homeschool group (unless you are under the ministry of a church).


 

If you are uncertain about your homeschool organizations tax exempt status, please contact me  for a private phone consultation.

My book The IRS and Your Homeschool Organization will also explain your options to become tax exempt and the required reports for tax exempt organizations.

 

 

Carol Topp, CPA

HomeschoolCPA increased my fees, but you’ll get more!

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I don’t do this often, but I recently increased some of my fees.

My popular phone consultation fee is the same at $60/hour.

My fee preparing the IRS Form 1023-EZ application for 501(c)(3) status for small organizations has increased from $150 to $250.

But starting July 1, 2016 the IRS fee for Form 1023-EZ drops from $400 to $275, so overall your total fee will be less than before. Gotta like that.

Additionally, I used to charge separately for reviewing your Articles of Incorporation  for compliance with the IRS 501(c)(3) rules. Now that will be included in the $250 fee.

And I will also include a letter explaining what your state filing requirements will be for your newly formed 501(c)(3) organization. I used to charge separately for that as well, but it’s now included.

So, your homeschool group can apply for 501(c)(3) status (or get reinstated if your tax exempt status was revoked because you failed to file the annual Form 990-Ns) for less money and get more services!

What’s not to like about that?

Helping homeschool leaders,

 

Carol Topp, CPA

HomeschoolCPA.com

 

 

 

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Trouble filing your 990-N?

Having Trouble Filing 990-Ns?

Some non-profit organizations have reported trouble trying to file the 990-N ePostcard using the new IRS system.

If you’re using Google Chrome or Firefox, try using Internet Explorer (IE) to see if that helps.  I know that IE is old-fashioned, but it seems to work.

By the way, if your organization operates on a calendar year (with your year ending December 31), then you Form 990-N is typically due May 15. Since May 15 is a Sunday the IRS has extended the due date for the 990-N to Monday, May 16, 2016.

 

Carol Topp, CPA

 

New website for filing IRS Annual ePostcard Form 990-N

990N

The Internal Revenue Service (IRS) is changing the website to file the Form 990-N. The Form 990-N used to be hosted by the Urban Institute, but starting February 29, 2016, the IRS will host the Form 990-N submission website.

The new website is www.IRS.gov/990N

The Form 990-N is a short,  annual filing that small (those normally with annual gross receipts up to $50,000) tax-exempt organizations file in place of the lengthier Form 990-EZ or Form 990. In order to file the Form 990-N, all nonprofits will be required to complete a one-time registration and file Form 990-N submissions through the IRS’s website at www.IRS.gov/990N.

Who must file
Most small tax-exempt organizations whose annual gross receipts are normally $50,000 or less can satisfy their annual reporting requirement by electronically submitting Form 990-N if they choose not to file Form 990 or Form 990-EZ instead.

Exceptions to this requirement include:

Form 990-N is easy to complete. You’ll need only eight items of basic information about your organization.

IRS reports your homeschool group needs to file every year

IRS reports for homeschool groups

Your homeschool group should be filing some reports every year with the IRS. Did you know that?

Carol Topp, the HomeschoolCPA, explains what forms homeschool groups should be filing with the IRS in this episode of the Dollars and Sense Show podcast.

Listen to the podcast here

In the podcast, Carol answers common questions from homeschool leaders such as:

  • We were told if our income is under $25,000 a year, we don’t have to file anything with the IRS. Is that true?
  • What changed? We never had to file anything with the IRS before!
  • But we’re not a 501c3 organizations (or don’t want to be), so why do we need to file anything with the IRS?
  • We don’t like government intervention. Why do we need to have anything to do with the IRS?
  • Our homeschool group doesn’t make any profit, so why do we have to file a tax return?
  • We’ve never filed anything with the IRS? We didn’t know we had to! Now what? Will be owe back taxes?

Here’s a helpful FAQ page explaining the IRS Form 990-N.

How to get added to the IRS database to file the Form 990-N.

If all this is new to you, don’t panic!

We can arrange a phone consultation with your homeschool leaders. Together we can sort out what needs to be done.

Contact me here.

Carol Topp, CPA

 

How to get added to the IRS database and file the Form 990N

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Carol,
We’re a newly organized homeschool support group. Is there anything we need to do with the IRS to establish ourselves as a 501c7 social club, or do we just need to get our EIN and start filing the 990N?

Thanks again! I really appreciate your help. 🙂

Melissa

 

After you get your EIN (Employer Identification Number), you won’t be able to file the 990-Ns just yet.

Self declare tax exempt status

Since you have not applied on paper for 501(c)(7) status  (you can “self declare” 501c7 status and don’t have to file the paperwork), you are not in the IRS database (yet), so you need to call the IRS Customer Account Services at 1-877-829-5500 and be added to their database so you can begin filing the Form 990Ns.

It typically takes 6 weeks after you call to be added to the IRS database.

Tips when calling the IRS

Say something like this,

“We’re a brand new 501c7 Social Club and my CPA said I needed to get added to the IRS exempt organization database, so we could start filing the 990-Ns.”


If you’re a homeschool educational program (co-op, etc)

Or if your homeschool group has an educational purpose, you’re most likely a 501c3 tax exempt organization. Read about the difference between 501c7 Social clubs and 501c3 organizations. In that case, you’ll say:

“We’re a brand new 501c3 educational organization and my CPA said I needed to get added to the IRS exempt organization database so we could start filing our 990-Ns.”

**Note that only 501c3 organizations with less than $5,000 annual gross revenues can “self-declare” their tax exempt status. 501c3s with more than $5,000/year in revenues must apply for 501c3 status using Form 1023 or the new, shorter Form 1023-EZ.


They will ask for your EIN and organization’s name, address, and probably a contact name.

They may also ask what date your fiscal year ends. Many support groups operate on a calendar year, but some operate on a school year with a year end of June 30 or July 31. Look at the form you filed when you applied for your EIN to see what you chose as your fiscal year end.

They may ask if you have “organizing documents.” They mean bylaws or Articles of Association (or Articles of Incorporation). So tell them if you have bylaws or Articles of Association/Articles of Incorporation. Samples can be found here.

Finally, if they tell you you must file a Form 1024 to obtain 501(c)(7) tax exempt status, tell them (with confidence) your CPA informed you that you can “self declare” tax exempt status as a social club and do not have to file the Form 1024.

Call the IRS early in the morning. They open at 8 am ET and you can usually get through pretty quickly of you call then, Record the date you call, the IRS employee name and their identification number.

Don’t forget to the the 990-N every year!

Be sure you go online to file the Form 990-N anytime after your fiscal year ends and before its due date which is 4 1/2 months after the end of your fiscal year. So if you operate on a calendar year, the 990-N is due May 15.

Have more questions about your homeschool organization’s tax exempt status? My book, The IRS and Your Homeschool Organization would be a big help.

Carol Topp, CPA

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Do You Know About IRS Required Filings for Homeschool Groups?

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Homeschool leaders frequently wonder, “Is my group supposed to be paying taxes to the IRS?” They ask if there is anything they should be reporting to the IRS, if so what and when.

Homeschool Contact With The IRS
There are several situations when a homeschool organization will be in contact with the IRS:

1. Your homeschool group opens a checking account and needs a tax identification number.

Usually, the first contact a homeschool organization has with the IRS is getting an Employer Identification Number (EIN). Most banks now request an EIN when a group opens a checking account. An EIN is similar to a Social Security Number for a business or nonprofit organization. They are available from the IRS at no charge at www.IRS.gov. Search for Form SS-4, the application for an EIN.

2. Your homeschool group pays a worker.

Your worker may be an independent contractor or an employee. Either way, there are forms to file with the IRS at the end of the calendar year (typically a 1099MISC or W-2, respectively). Additionally, there are employer taxes, such as Social Security or Medicare taxes, to pay in addition to employee wages. My books Paying Workers in a Homeschool Organization and Money Management in a Homeschool Organization will walk you through the details of hiring and paying workers.

3. Your group makes money from fund raisers, selling T-shirts and other merchandise, or selling advertising on your website.

Homeschool groups often make money from activities not related to homeschooling. The IRS calls income from these activities “unrelated business income (UBI)” and will tax the profit from these activities. Usually homeschool groups avoid the UBI tax by using one of the IRS exemptions which include using all volunteer labor, selling donated merchandise or having unrelated business income of less than $1,000 annually.

4. Your homeschool co-op brings in income of more than $5,000 in a year.

If your co-op’s gross revenues are more than $5,000 a year, your organization should file an application (Form 1023 or the new, shorter Form 1023-EZ) with the IRS for 501(c)(3) tax exempt status. Approval of tax exempt status by the IRS means that your co-op will not pay income tax on its financial surplus. Your organization is also eligible to receive tax deductible donations and may participate in fundraisers only open to 501(c)(3) organizations, such as Box Tops for Education.

If your organization’s gross revenues are under $5,000 a year, you are granted an exception from filing the application paperwork for 501(c)(3) status. You can “self-declare” your tax exempt status without applying. But you will still have annual reporting requirements, the Form 990N (see below).

5. Your homeschool support group wishes to avoid taxes on their surplus.

If your homeschool organization is a support group, then you may be eligible for tax exempt status as a 501(c)(7) social club with the IRS. Social clubs can “self-declare” tax exempt status but some file an application (Form 1024) with the IRS. Read more about eligibility for 501(c)(7) social club status at HomeschoolCPA.com/SocialClub. Even if you self-declare tax exempt status for your support group, the IRS still requires an annual report (see below).

New IRS Filing Requirement for All Nonprofit Organizations

As of 2006, the IRS requires all nonprofit organizations (except churches) to begin filing an annual information return called a Form 990/990EZ or 990N, even if they have not yet applied for tax exempt status or are eligible to self-declare tax exempt status. The short, online Form 990N is for nonprofit organizations with annual gross revenues under $50,000. It is a very simple online form with only six questions. No financial information is given.

A. Calendar year or tax year dates
B. Check if gross revenue is $50,000 or less
C. Name and address of the organization
D. Employer Identification Number (EIN)
E. Website
F. One officer’s name and address

The Form 990N is filed online at Epostcard.form990.org and is due due 4 1/2 months after the end of your fiscal year (May 15 for groups that run on a calendar year).

Your organization may have difficulty in filing the Form 990N if you have not applied for tax exempt status. You will have to call the IRS Customer Account Services at 1-877-829-5500 and ask to be added to their exempt organizations database so you can begin filing the Form 990Ns. It typically takes 6 weeks to be added to the IRS database.

 

What Happens if Your Organization Doesn’t File the Form 990N?

There is no financial penalty for late filing, but failure to file the Form 990N for three consecutive years means automatic revocation of tax exempt status. Lately, I have helped several homeschool organizations that did not file their 990Ns for several years (most did not know about the requirement) and had their tax exempt status automatically revoked.

If all this seems confusing or overwhelming, please visit HomeschoolCPA.com. On the blog page, type “990N” into the search box and read the blog posts about this IRS filing requirement.  Additionally, my book The IRS and Your Homeschool Organization can give you details on applying for tax exempt status.

 

Carol Topp, CPA is an author, accountant and retired homeschool mom. She is the author of Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out, The IRS and Your Homeschool Organization and Money Management in a Homeschool Organization: A Guide for Treasurers. She shares her experience as a CPA, homeschool mom and co-op treasurer in her books, at homeschool conventions and on her podcast DollarsAndSenseShow.com. Carol offers consulting services to homeschool leaders. Contact her on her website HomeschooCPA.com.

 

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