Maintaining tax-exempt status under Section 501(c)(3) of the Internal Revenue Code requires strict adherence to federal and state reporting requirements. These filings ensure transparency, accountability, and continued eligibility for charitable benefits. Failure to comply can result in penalties, loss of public trust, or even revocation of tax-exempt status. Below is an overview of the key reporting obligations every 501(c)(3) organization must meet.
1. Annual IRS Form 990 Filing
Every 501(c)(3) organization must file an annual information return with the IRS. The specific form depends on the organization’s size and financial activity:
- Form 990-N (e-Postcard): For organizations with annual gross receipts of $50,000 or less.
- Form 990-EZ: For organizations with annual gross receipts under $200,000 and total assets under $500,000.
- Form 990: For larger organizations exceeding those thresholds.
These forms disclose financial data, program accomplishments, and governance information. Filing ensures the organization demonstrates continued operation for charitable purposes. Missing three consecutive annual filings results in automatic revocation of tax-exempt status.
2. Unrelated Business Income Reporting (Form 990-T)
If a nonprofit earns income from activities unrelated to its exempt purpose—such as selling merchandise or renting property—it must file Form 990-T to report Unrelated Business Income Tax (UBIT). This form ensures that nonprofits remain focused on their charitable mission rather than operating as for-profit entities.
3. Employment and Payroll Reporting
Nonprofits with employees must comply with federal and state employment tax laws. This includes:
- Filing Form 941 (Quarterly Federal Tax Return) and Form 940 (Annual FUTA Return).
- Issuing W-2s to employees and 1099s to independent contractors.
- Withholding and remitting payroll taxes accurately and on time.
4. State Filings and Charitable Registrations
Beyond federal requirements, most states require nonprofits to file annual reports or charitable solicitation renewals with the Secretary of State or Attorney General’s office. These reports typically include updated contact information, financial summaries, and governance details.
5. Recordkeeping and Financial Transparency
The IRS expects nonprofits to maintain detailed records of income, expenses, grants, and donor contributions. These records support the accuracy of Form 990 filings and demonstrate responsible financial stewardship.
By fulfilling these reporting requirements, 501(c)(3) organizations uphold public trust, maintain legal compliance, and ensure their mission continues to benefit the communities they serve. If you need professional assistance, reach out to us today. Our team at Dimov Tax stands ready to present expert aid.
