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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How to Claim Your Moving Expenses Tax Deduction in 2022

At some point in your life, you may need to relocate for work, and we all know that moving is expensive. Though the Tax Cuts and Jobs Act (TCJA) has eliminated the moving expense deductions for most taxpayers, you can still claim a certain deduction for relocating, storage, and travel expenses.

Here’s all you need to know about the moving expenses tax deduction, its requirements, and how to claim this deduction in 2022. 

What is the moving expenses tax deduction?

According to the IRS’s definition, moving expenses are costs incurred by a taxpayer related to relocating for work or being transferred to a new location. Moving expenses are considered adjustments to income. So, you can deduct these expenses even if you don’t itemize your deductions.

The moving expenses tax deduction covers the reasonable costs of moving your personal belongings and household items to the new location, such as:

  • The expenses for yourself and other members of your household to travel to the new location
  • The cost of oil, gasoline, parking fees, and highway tolls when traveling to the new location with your personal vehicle
  • Airline and train tickets costs
  • You can even deduct the cost of renting a storage unit for up to 30 days if you cannot move into your new house immediately after leaving your former house.

The Tax Cuts and Jobs Act of 2017 abolished the deduction of moving expenses for tax years 2018 through 2025, except for members of the military on active duty who relocate due to a military order. If you’re a member of the US army, you can file Form 3903 to claim moving expenses as federal income tax deductions. 

However, you can still claim your moving expenses deduction if your move is work-related and passes the time and distance tests.

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What are the requirements for claiming your moving expenses tax deduction?

To be qualified for the moving expenses tax deduction, you must pass one of these tests:

Distance test 

The moving expenses tax deduction does not apply to costs incurred for relocation within the same town. Your new job must be at least 50 miles away from your old home. If your previous commute was five miles one way, the distance between your new job location and your old home must be at least 55 miles. The IRS requires you to employ the shortest commutable paths between two places when determining whether you meet the distance requirement.

Time test 

You must work as a full-time employee for a minimum period of 39 weeks during the initial 12-month period starting on the day you arrive in the new location. You can still meet this requirement even if the 39 weeks are not consecutive and you work for different employers. The IRS does not specify how many days or hours you must work per week to be considered a full-time employee; instead, it depends on your industry’s commonly-accepted standard.

How to claim your moving expenses tax deduction in 2022

Moving expenses are one of the few tax deductions that you can claim before knowing if you meet the requirements. Because of the 12-month time limit, most taxpayers will not be able to pass the time test until the next tax year. However, the IRS allows taxpayers to claim the moving expenses tax deduction in the year that they relocate.

To claim the deduction, you must list all of your relocation expenses on Form 3903 and attach it to your personal tax return for the year in which you relocated. If you didn’t meet all requirements by the end of the 12-month period, you must reverse the deduction. You can either file the original deduction amount in “other income” on your next tax return or modify the original form to exclude the moving expenses tax deduction from the tax calculation.

The bottom line

We understand that moving is expensive. However, with a good understanding of the state moving expense deductions that you’re still eligible for, you can make the best out of your deductions, and use allowed strategies to lower your taxes.

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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 Are The Differences Between Tax Deductions And Tax Credits?

We all like to claim tax deductions and credits when filing our tax returns. They both allow us to pay less tax—and who doesn’t like that? 

But do you know that tax deductions and tax credits lower our taxes using totally different mechanisms? In other words, they are not the same thing and many people often don’t realize this. 

So, how can you tell these two confusing concepts apart? 

Read on to find out! 

What is a tax deduction?

A deduction lowers the income subject to taxation, resulting in you paying less in taxes. In other words, before calculating how much tax you owe, you subtract deductions from your income. Common tax deductions include home office deduction, student loan interest, and retirement contributions.  

How much you can save from tax deductions depends on your marginal tax rate. Simply multiply the tax deduction by the marginal tax rate to figure out how much that deduction can decrease your taxes. For example, if you have a $2000 deduction and you fall into the 22% tax bracket, you will be able to lower your taxes by $440. So, the higher the tax bracket you’re in, the more value deductions will bring to you. 

What is a tax credit? 

A tax credit lowers the amount of taxes you owe directly. Common tax credits include the American Opportunity Tax Credit (AOTC), the Child Tax Credit, and the Saver’s Tax Credit

It’s very simple to know how much your tax credit will save you. You don’t need any marginal tax rate or calculation. Once you meet all the requirements of a specific tax credit, subtract the value of that tax credit directly from your taxes. 

For example, let’s say you have a tax bill worth $6000 this year. A $2,000 tax credit decreases your taxes straight down dollar for dollar—now you only owe $4000 to the IRS! 

Tax deduction vs. Tax credit: Which one should you choose? 

Generally, tax credits benefit you more than tax deductions since they lower your tax bill directly. Still, if you can only take a tax credit or a deduction for the same expenses, do the math to determine which one will save you the most money possible. 

In conclusion 

Knowing how to distinguish between these two important tax terms, tax deductions and tax credits will help you file taxes quicker and more accurately and prevent you from making unfortunate costly mistakes. 

After you file your tax return, you may think the tax nightmare is over. However, to be cautious, experts advise keeping a copy of tax receipts for up to seven years in the event of audits. If you need an easy way to deal with this, Shoeboxed can help you! 

Shoeboxed is an online application that can transform your receipts and documents into digital in just a click. Then, 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. 
Stay audit-ready with Shoeboxed for FREE now!