It’s a common misconception that nonprofits don’t have to file taxes. Nonprofits file annual information returns even if they do not owe federal income tax. They must inform the IRS each year, offering detailed financial records, to keep their tax-exempt status.
Annual IRS Filing Requirement
All recognized nonprofits—whether 501(c)(3), 501(c)(4), or other exempt organizations—must annually file a Form 990 series return. Nonprofits must submit one of the following forms:
- Form 990-N (e-Postcard): This is for organizations with gross receipts of $50,000 or less.
- Form 990−EZ: This is for organizations with gross receipts of $200,000 or less and total assets of $500,000 or less.
- Form 990: This is for larger nonprofits whose gross receipts are over the limits above.
- Form 990-PF: All private foundations must file this, regardless of size.
These returns require transparency regarding a nonprofit’s income, expenses, and activities. Even for inactive organizations, with no income during the year, a return must still be filed.
Nonprofits Filing Deadlines
Nonprofits have until the 15th day of the 5th month after their fiscal year ends to file their returns with the IRS. For nonprofits that follow the calendar year, the deadline is May 15. You can file Form 8868 if you need an additional six months to file.
Once deadlines have passed, the IRS will impose some penalties. Your tax-exempt status will also be revoked if you fail to file for 3 consecutive years, and the reinstatement process will take a lot of time and effort.
State-Level Tax Filings
Many states, including California, also require some form of annual or biennial filings. These filings may be state income reports or other documents that may be required by the Franchise Tax Board, Attorney General’s Office, or Secretary of State.
Staying Compliant
Nonprofits can avoid penalties by establishing a compliance calendar months in advance to verify the year-end of the fiscal year, and confirm that all the required documents have been filed. The help of a CPA or nonprofit compliance specialist may be needed for complex organizations.
Bottom Line
Nonprofits must file taxes annually, even if they have no income. To preserve your organization’s tax-exempt status and credibility, you must keep up with your federal and state filings. If you need assistance, contact Dimov Tax for professional support. Our team presents 360 degree expert aid to nonprofits.