It's tax season for nonprofits, and if your organization is a smaller one, you might be looking at Form 990-EZ: Short Form Return of Organization Exempt From Income Tax. While the "EZ" might imply simplicity, navigating IRS forms can still feel like a puzzle. Don't worry, we're here to break it down for you, step by step!
Demystifying Form 990-EZ: Your Essential Filing Guide
The Form 990-EZ is an annual information return used by smaller tax-exempt organizations to provide the IRS with details about their mission, programs, and finances. It ensures transparency and helps the IRS monitor compliance with tax-exempt status. If your organization's gross receipts are less than $200,000 AND its total assets are less than $500,000 at the end of its tax year, then the 990-EZ is likely the form for you.
Ready to get started? Let's dive in!
Step 1: Are you sure 990-EZ is the right form for you?
Before you even think about filling out a single line, it's crucial to confirm that Form 990-EZ is indeed the correct return for your organization. Many organizations automatically assume they should file the 990-EZ because they're small, but there are specific thresholds.
- Gross Receipts: Your organization's gross receipts (total income from all sources) for the tax year must be less than $200,000.
- Total Assets: Your organization's total assets at the end of the tax year must be less than $500,000.
Important Note: If your gross receipts are normally $50,000 or less, you might be eligible to file Form 990-N (the "e-Postcard"), which is even simpler! However, some organizations are not permitted to file the 990-N and must use a longer form instead, even if they meet the gross receipts threshold. Always check the official IRS instructions for the most up-to-date information and any specific exceptions for your organization type. If your organization exceeds either of these thresholds, you'll generally need to file the longer Form 990.
Step 2: Gather Your Financial Records and Organization Information
This step is all about preparation. Trying to complete the form without all your information handy will lead to frustration and errors. Think of it like baking a cake – you wouldn't start without all the ingredients measured out!
Sub-heading: Essential Documents and Data You'll Need:
- Employer Identification Number (EIN): This is your organization's unique tax ID number.
- Organization's Legal Name and Address: Ensure this matches IRS records exactly.
- Tax Year: Determine the start and end dates of the tax year for which you are filing. Most organizations use a calendar year (January 1 - December 31), but some operate on a fiscal year.
- Accounting Method: Are you on a cash or accrual basis? This dictates when you record income and expenses.
- Statement of Revenue: This includes all income your organization received during the tax year.
- Contributions, gifts, grants, and bequests
- Program service revenue (fees for services, sales of goods related to your mission)
- Membership dues
- Investment income (interest, dividends)
- Gross income from sales of assets and investments
- Net income from gaming and fundraising events
- Other revenue sources
- Statement of Expenses: A detailed breakdown of all expenditures.
- Grants and similar amounts paid
- Benefits paid to or for members
- Salaries, other compensation, employee benefits
- Professional fees (legal, accounting)
- Occupancy (rent, utilities)
- Travel, conferences, and meetings
- Printing, publications, postage
- Other expenses
- Balance Sheet Information:
- Cash, savings, and investments
- Land, buildings, and equipment
- Other assets
- Total assets (at both the beginning and end of the year)
- Liabilities
- Net assets or fund balances (at both the beginning and end of the year)
- Program Service Accomplishments: A description of your organization's significant activities and achievements related to its exempt purpose during the year. Be concise but informative!
- Officers, Directors, Trustees, and Key Employees Information: For each individual, you'll need their name, title, average hours per week devoted to the organization, and compensation (if any), including health benefits and deferred compensation.
- Information on Independent Contractors: If you paid any independent contractors more than $100,000 for services, you'll need their names, business addresses, type of service provided, and compensation.
- Information on Required Schedules: Depending on your organization's activities, you may need to complete and attach additional schedules (e.g., Schedule B for contributors, Schedule G for fundraising activities).
Step 3: Choose Your Filing Method: E-File (Recommended) or Paper File
The IRS strongly encourages electronic filing (e-filing) for Form 990-EZ. In fact, for tax years ending July 31, 2021, and later, most organizations must file Form 990-EZ electronically. E-filing offers several advantages, including faster processing, quicker refunds (if applicable), and immediate confirmation of receipt.
Sub-heading: Option A: E-filing Form 990-EZ (The Modern Way!)
E-filing typically involves using IRS-authorized e-file providers. These providers offer user-friendly interfaces, often with interview-style questions, to guide you through the process.
- Select an IRS-Authorized E-file Provider: Do a quick online search for "IRS authorized 990-EZ e-file provider." Many reputable tax software companies offer this service. Look for providers that offer:
- Guided filing processes: This can be invaluable for ensuring you don't miss any required information.
- Support for all necessary schedules: You don't want to find out halfway through that a critical schedule isn't supported.
- Audit checks/error checks: These features help identify potential mistakes before you submit.
- Secure payment options: Ensure your financial information is protected.
- Customer support: In case you run into any issues.
- Create an Account and Enter Organization Details: You'll typically start by creating an account on the chosen platform and entering your organization's basic information (EIN, name, address, tax year). Some providers can even import your EIN details directly from IRS records.
- Complete Form 990-EZ Sections: The e-file software will guide you through each part of Form 990-EZ. Be prepared to input all the financial data and organizational information you gathered in Step 2.
- Part I: Revenue, Expenses, and Net Assets: This is where you report your organization's financial activities for the year. Accuracy here is paramount!
- Part II: Balance Sheet: Report your organization's assets, liabilities, and net assets at the beginning and end of the tax year.
- Part III: Statement of Program Service Accomplishments: Describe what your organization did during the year to achieve its exempt purpose. This is your chance to tell your story!
- Part IV: List of Officers, Directors, Trustees, and Key Employees: Provide the requested details for these individuals.
- Part V: Other Information: This section contains a series of "Yes" or "No" questions about various organizational activities, compliance, and other IRS requirements. Read each question carefully.
- Part VI: Section 501(c)(3) Organizations Only: If your organization is a 501(c)(3), you'll have additional questions to answer regarding public charity status, lobbying, and other specific requirements.
- Attach Required Schedules: The software should prompt you to attach any necessary schedules based on your answers within the form. These are crucial for a complete return.
- Review and Verify: This is a critical step! Before transmitting, thoroughly review all the information you've entered. Most e-file providers have a review process that highlights potential errors. Double-check all numbers, names, and addresses.
- Sign and Transmit: You will electronically sign the return (often using a PIN or by signing a separate form that is then uploaded) and then transmit it to the IRS.
- Confirmation of Filing: The e-file provider will typically give you an immediate confirmation that your return has been submitted. You should then receive an email from the IRS (via the provider) indicating whether your return was accepted or rejected. Keep these confirmations for your records!
Sub-heading: Option B: Paper Filing Form 990-EZ (Use Only if Electronic Filing is Not Possible)
While e-filing is highly encouraged and often required, there might be rare instances where paper filing is necessary.
- Download the Official Form 990-EZ and Instructions: Go to the official IRS website (IRS.gov) and search for "Form 990-EZ" and "Instructions for Form 990-EZ." Always use the most current version for your tax year.
- Print Clearly and Legibly: If handwriting, use dark ink and print neatly. Errors due to illegibility can cause delays.
- Complete All Applicable Sections: Fill out each part of the form as described in the e-filing section above. Refer to the official IRS instructions for every line item – they are your definitive guide.
- Attach Required Schedules: Make sure to print and attach all necessary schedules.
- Review Thoroughly: Just like with e-filing, meticulously review every line for accuracy. A fresh pair of eyes can be helpful.
- Sign and Date: The return must be signed by an authorized officer of the organization. Make sure the signature is original.
- Assemble the Return: Place Form 990-EZ on top, followed by any required schedules in alphabetical or numerical order.
- Mail to the Correct IRS Address: The mailing address for paper-filed Form 990-EZ depends on your organization's location. Refer to the Form 990-EZ instructions for the specific mailing address. Do not guess! It's usually listed in the "Where to File" section.
- Keep Copies: Make a complete copy of the signed return and all attachments for your organization's records.
Step 4: Meet the Deadline and Consider Extensions
Filing on time is critical to avoid penalties and potential loss of tax-exempt status.
Sub-heading: The Standard Due Date
Form 990-EZ is generally due on the 15th day of the 5th month after your organization's tax year ends.
- For Calendar Year Filers (January 1 - December 31): The due date is May 15th of the following year.
- For Fiscal Year Filers: Count five months from the end of your fiscal year, then find the 15th day.
What if the Due Date Falls on a Weekend or Holiday? If the due date falls on a Saturday, Sunday, or legal holiday, the deadline is extended to the next business day.
Sub-heading: Requesting an Extension (Form 8868)
If you need more time to prepare your return, you can request an automatic 6-month extension by filing Form 8868, Application for Extension of Time To File an Exempt Organization Return.
- File Form 8868 before your original Form 990-EZ due date.
- You do not need to provide a reason for the extension.
- An extension to file is not an extension to pay any taxes that may be due (though typically, exempt organizations filing 990-EZ do not owe income tax).
Step 5: Maintain Records and Be Prepared for Public Inspection
Once filed, your Form 990-EZ (with some exceptions for Schedule B contributor information) becomes a public document.
Sub-heading: Recordkeeping
- Keep a complete copy of your filed return: This includes all schedules and attachments, along with proof of filing (e.g., e-file confirmation, certified mail receipt).
- Retain all supporting documentation: This means all financial records, meeting minutes, contracts, and other documents that support the information reported on your 990-EZ. The IRS generally recommends retaining records for at least three years, but some records might need to be kept longer.
Sub-heading: Public Inspection Requirements
Tax-exempt organizations are generally required to make their three most recent Forms 990-EZ available for public inspection upon request. This can be done at your principal office, and copies must be provided if requested, though you can charge a reasonable fee for copying and postage. Online platforms like GuideStar also make these forms readily accessible to the public.
Being transparent builds trust with donors and the public. Ensure your Form 990-EZ accurately reflects your organization's activities and financial health.
10 Related FAQ Questions
How to choose between Form 990-N, 990-EZ, and 990?
The choice depends on your organization's gross receipts and total assets. If gross receipts are normally $50,000 or less, you can file Form 990-N. If gross receipts are less than $200,000 AND total assets are less than $500,000, you can file Form 990-EZ. If you exceed these thresholds, you must file the full Form 990.
How to find my organization's EIN?
Your Employer Identification Number (EIN) is a nine-digit number assigned by the IRS. It should be on your organization's tax-exempt determination letter from the IRS, previous tax returns, or other official IRS correspondence. If you can't find it, you may need to call the IRS.
How to get an extension for filing Form 990-EZ?
You can request an automatic 6-month extension by filing Form 8868, Application for Extension of Time To File an Exempt Organization Return, before your original Form 990-EZ due date.
How to correct an error on a previously filed Form 990-EZ?
To correct an error, you must file an amended Form 990-EZ. Check the "Amended Return" box in the heading of the form and re-enter all correct information.
How to avoid penalties for late filing Form 990-EZ?
File your Form 990-EZ by the due date, or file Form 8868 to request an extension before the due date. Failure to file on time can result in penalties of $20 per day (for organizations with gross receipts less than $1,000,000) for each day the return is late.
How to know if my organization needs to file any schedules with Form 990-EZ?
The instructions for Form 990-EZ and the e-filing software will guide you. Common triggers for schedules include having significant contributions (Schedule B), engaging in fundraising or gaming activities (Schedule G), or being a school (Schedule E).
How to ensure my organization's tax-exempt status isn't revoked?
File your required Form 990-EZ (or 990-N or 990) every year. Failure to file for three consecutive years will result in automatic revocation of your tax-exempt status.
How to find the official IRS instructions for Form 990-EZ?
Always go directly to the IRS website (IRS.gov). Search for "Form 990-EZ" and "Instructions for Form 990-EZ" to ensure you have the most current version.
How to report compensation for officers and key employees on Form 990-EZ?
In Part IV of Form 990-EZ, you will list the name, title, average hours per week, and all forms of compensation (including health benefits and deferred compensation) for your officers, directors, trustees, and key employees.
How to make my organization's Form 990-EZ available for public inspection?
Your organization is required to make its three most recent Forms 990-EZ available for public inspection at its principal office. Many organizations also post them on their website or make them available through platforms like GuideStar.
