Non-Profit Tax Returns: Avoiding "Doomsday"

The New York Times recently printed an article with the ominous title “One-Fourth of Nonprofits Are to Lose Tax Breaks” (see the Times’ website at http://www.nytimes.com/2010/04/23/us/23exempt.html.) In fact, the opening line of the article reads “As many as 400,000 nonprofit organizations are weeks away from doomsday…” Before everyone heads to panicsville, let’s take a quick look at what this really means for all of you nonprofit performing arts organizations out there.

Generally, any organization that has obtained tax-exempt status from the IRS is required to file an annual tax return – either Form 990, or Form 990-EZ – to report income and expenses. Up until 2007, tax-exempt orgs whose annual gross receipts were $25,000 or less were exempt from this filing requirement. However, a new law passed several years ago included a provision requiring ALL tax-exempt orgs to file an annual return. The new law also provides that any tax-exempt org that fails to file its annual return three years in a row will lose its tax-exempt status. Thus, the filing deadline is looming: any tax-exempt org that has not filed its returns for the last three years will lose its tax-exempt status!

The very good news for these organizations is that filing the necessary return could not be simpler! Small tax-exempt organizations whose annual gross receipts are $25,000 or less can opt out of filing the elaborate Form 990 or the slightly-less-elaborate Form 990-EZ, and INSTEAD file the Form 990-N, also known as the e-Postcard. Filing the e-Postcard requires that you submit the following information regarding your tax-exempt org:

1. Your organization’s legal name
2. Any other names your organization uses to do business (i.e., your d/b/a name)
3. Your organization’s mailing address
4. Your organization's website address (if you have one)
5. Your organization's Employer Identification Number (EIN)
6. The name and address of one of your organization’s principal officers
7. A “yes” or “no” answer to the question “Has your organization terminated or gone out of business?”
8. A “yes” or “no” answer to the question “Are you gross receipts normally $25,000 or less?”

That’s it. And filing is free!

The usual deadline for filing any of the e-Postcard is May 15th. However, since May 15th falls on a Saturday this year, you have until the following Monday, May 17th, to get your return in to the IRS. The form can be submitted online here: http://epostcard.form990.org/.

One important note – tax-exempt organizations whose gross receipts are normally above $25,000 always have been required to file a tax return each year, so this change doesn’t affect them. (But they, too, would lose their tax-exempt status if they failed to file for three years in a row!)

So, with all due respect to the New York Times, this is hardly a doomsday scenario. And to all of you small nonprofits who have neglected your returns for the last three years: Take a break, pour yourself a stiff drink, and take a few minutes at your computer to ensure that your tax-exempt organization remains in good standing!

Posted by Robyn Guilliams, May 11, 2010