IRS Form 990: Tax Preparation Guide for Nonprofits

Nonprofit organizations help improve people’s quality of life at the municipal, state, or even national levels. Consequently, this type of organization is eligible for specific tax benefits, namely that they are exempt from most federal income taxes.

However, nonprofits with the IRS’s tax-exempt status are still required to fulfill certain requirements, such as filing a yearly Form 990 or other 990 series information return. 

Understanding tax issues related to nonprofit organizations can be time-consuming and complicated for beginners. So in this article, we’ll give a detailed tax preparation guide for nonprofits by answering the most common questions, including what Form 990 is, what form a nonprofit organization needs to file, and how to file taxes for nonprofits. 

What is the IRS Form 990?

The IRS Form 990 series are informational tax forms that most nonprofit organizations must submit annually. Both the long-form and short-form provide the IRS with details about the organization’s financial situations and annual activities, including grants, fundraising fees, program service revenue, employee salaries, and the assets the organization purchased, sold, or maintained. The form also shows the number of employees, the number of voting members in the governing body, and the organization’s goal statement.

According to the IRS, all tax-exempt nonprofits must file their three most recent Form 990s. All Form 990s are available to the public, meaning anyone can access the data. Some companies use these documents to provide funders with additional information about the nonprofits they’re interested in sponsoring.

Which form does a nonprofit file?

Not all nonprofit organizations file the same Form 990. Many types of nonprofits, including religious institutions, foreign organizations, and specific governmental and political organizations, are exempt from filing the Form 990 series.

Nonprofits file the general IRS Form 990 if their organization’s gross receipts are $200,000 or more and its total assets are $500,000 or more. Form 990 is a twelve-page form typically filed by old and large nonprofits.

Tax-exempt nonprofit organizations with gross receipts of $200,000 or less and assets less than $500,000 at the end of the year are required to file Form 990-EZ. Form 990-EZ is only four pages long and is considered the short-form return. 

Tax-exempt nonprofits with gross receipts less than or equal to $50,000 may file a Form 990-N. Form 990-N is often known as the 990 Postcard. This form is the shortest of the IRS Form 990 series, with only eight questions, and must be filed electronically. This form differs from other Form 990s because it’s much shorter and easier to complete.

There’s a 4th type of Form 990 as well, which is filed annually by private organizations – Form 990-PF. You can file Form 990-PF online on the IRS website.

What is the deadline for filing nonprofit taxes?

The deadline for filing nonprofit tax returns is the 15th day of the fifth month after the end of the organization’s fiscal year. Since most nonprofits operate on the fiscal year, their tax forms are due on May 15th unless they’ve specifically requested an extension. For example, if your organization’s accounting year ends on December 31st, 2021, you must file Form 990 by May 15th, 2022.  

What happens if a nonprofit fails to file a Form 990? 

Nonprofit organizations that fail to file a Form 990 series tax form for three consecutive years can lose their tax-exempt status, which can cause long-term consequences for the organization. 

If you’re unsure how to file a Form 990, you can check our step-by-step guide below or consult a tax professional. 

The IRS Form 990 tax preparation guide for nonprofits

Nonprofit organizations must file Form 990 annually to maintain their tax-exempt status. Here’s the detailed guide to filing a Form 990:

  • Determine which form you must file according to the IRS criteria.
  • Keep all of your business information (including your business’s legal name, tax year, Employer Identification Number (EIN), gross receipts, contact information, etc.) in order. This practice is also vital to any type of tax preparation.
  • Gather information about employee salaries, fundraising activities, and other income or donations. You may also need to include your W-2s for employees, donation receipts, etc. 
  • Tax-exempt organizations are generally required to file electronically. Especially large organizations, which file at least 250 returns (such as Form W-2 and Form 1099), are required to file Form 990 electronically. 
  • Fill out the form as indicated, paying close attention to the Checklist of Required Schedules, which outlines which sections must be filled out based on your organization’s special circumstances.
  • File the form by the 15th day of the fifth month after the end of your organization’s accounting period. 

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The bottom line

Filing nonprofit taxes may seem challenging at first, but as long as you keep our IRS Form 990 tax preparation guide in hand, together with the right knowledge, resources, and tools, you can focus on starting and growing your nonprofit organization. 

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Most Famous Tax Court Cases In IRS History That You Might Want to Know

Everyone wants to save money, especially when it comes to taxes. It is not illegal to reduce or minimize business or personal income taxes by legitimate accounting methods. There are, in fact, many exemptions and deductions available under state and federal tax codes to help you minimize your taxes. 

However, when you use deceptive or dishonest methods to save money on taxes, you risk facing significant penalties and perhaps jail time. Even if only a tiny fraction of returns are audited each year, the fines are not worth the risk. 

This article will introduce you to the most famous tax court cases to show how high a price you can pay for this crime.

The differences between avoiding taxes and evading taxes

There is always a clear line between the creativity in minimizing your taxes and breaking the law. Avoiding taxes is legal and understandable, but evading taxes comes with tough consequences. 

Tax avoidance means using legal accounting methods to lower the amount of taxes owed. For example, you can deposit your money into an Individual Savings Account (ISA) to avoid paying income tax on the interest you earn on your cash savings. You can also invest money into a pension scheme or claim capital allowances on things used for business purposes.

On the other hand, tax evasion occurs when a person or business uses illegal means to escape paying taxes. Some common examples of tax evasion include withholding from the IRS the tax you owe, keeping your business off the books by doing transactions in cash with no receipts, or using an offshore bank account to hide money, stocks, or other assets. 

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Most famous tax court cases in IRS history

Al Capone

Al Capone’s case is possibly the most famous one in IRS history. Though this notorious gangster had committed various illegal acts, including bootlegging, prostitution, and murder, only one landed him in prison––income tax evasion.

Under Capone’s leadership at the Chicago Outfit, the organization generated an estimated $100 million annual income. He was convicted on five counts of tax evasion from 1925 to 1927 and willful failure to file for 1928-1929. He was sentenced to 11 years in Federal Prison (including the notorious Alcatraz) and paid $80,000 in fines and outstanding tax bills.

Joe Francis

Joe Francis is a talented American entrepreneur, film producer, founder, and creator of Girls Gone Wild’s entertainment brand. He was accused of criminal tax evasion in 2007 for allegedly filing fake business tax returns. Francis is accused of submitting fake company expenses totaling more than $20 million to avoid paying taxes. He was able to avoid the felony accusation by accepting a guilty plea.

However, he didn’t seem to have completely avoided his tax problems. The IRS issued Francis a $33.8 million tax lien in November 2009.

Walter Anderson

Anderson’s case was probably one of the most famous tax court cases in IRS history. Walter Anderson, a former telecommunications executive, was accused of using aliases, offshore bank accounts, and shell businesses to conceal his earnings. Anderson pleaded a guilty plea in 2006, admitting to concealing nearly $365 million in earnings. He was condemned to nine years in prison and ordered to pay $200 million in compensation.

Anderson avoided the majority of the taxes owed due to a typo mistake in the amount of the federal government’s judgment. In this case, the IRS agreed to pay taxes and penalties for three years. Anderson is, however, still liable for $23 million owing to the District of Columbia government. 

Wesley Snipes

Wesley Snipes, the famous American actor, film producer, and martial artist, has been charged with numerous offenses by federal prosecutors. 

The “Blade” star is accused of hiding money in overseas accounts and failing to file federal tax returns for years. Snipes’ federal tax debt is reported to be approximately $12 million.

He was only convicted of misdemeanor charges in 2008 after being acquitted on felony tax fraud and conspiracy charges. 

Douglas P. Rosile, his accountant, and tax protester Eddie Ray Kahn were also accused as co-defendants. Rosile received a four-and-a-half-year sentence, and Kahn was given a ten-year sentence. 

Leona Roberts Helmsley

Leona Roberts Helmsley, an American businesswoman has accumulated a multi-billion dollar real estate portfolio. The “Queen of Mean” and her husband, Harry, were charged with invoicing millions of dollars in personal expenses as their business in order to evade taxes. Helmsley was convicted of three counts of tax evasion in 1989. She was sentenced to 18 months in federal prison. A fun fact was that she was sentenced to prison on the income tax deadline day for that year, April 15, 1992.

The bottom line

Evading taxes can lead to serious consequences. As you can see from the US’ top tax court cases listed above, it’s critical to understand what happens if you cross the line between legal tax avoidance techniques and unlawful tax evasion. If you have tax questions or have received a notice from the IRS, it’s a good idea to consult with a tax professional to discuss your situation and your choices moving forward.

About Shoeboxed

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes.

Access your Shoeboxed account from your web browser or smartphone app. Stay audit-ready with Shoeboxed for FREE now!

What to do if You Receive an IRS Notice

It’s a moment many taxpayers dread. A letter arrives from the IRS — and it’s not a refund check. Don’t panic; many of these letters can be dealt with simply and painlessly.

Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

  • Agree? If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
  • Disagree?  If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

Be sure to keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, What You Should Know about the IRS Collection Process. Information about penalties and interest charges is available in Publication 17, Your Federal Income Tax. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).