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Nonprofits Not Exempt from Annual Filing Requirements: Here’s What You Need to Know

August 10, 2021 Posted by Casey Summar in Form 990, IRS, Taxes

As a nonprofit dedicated to effecting positive change, the majority of your efforts are focused on making a difference. Whether that’s inspiring volunteers, raising capital, sharing information, or boots-on-the-ground action, we understand that spending time on administrative activities is not why you joined the nonprofit world. However, to remain in good standing as a nonprofit corporation with 501(c)(3) status, there are important federal and state filing requirements that must be met to avoid penalties, suspension of the nonprofit’s right to conduct business including raising and spending funds, and possible revocation of its federal or state tax-exempt status.

Keeping up to Date with the IRS

Even though 501(c)(3) organizations are exempt from most federal taxes, almost all of them (except churches and many faith-based organizations, state institutions and government entities) must file an annual informational return with the IRS, the Form 990 Series. The return must be filed on the 15th day of the 5th month after the end of your organization’s fiscal year, although an automatic six-month extension is available by filing Form 8868 to avoid penalties for late filing. If your organization fails to file its annual return for three consecutive years, its tax-exempt status will be automatically revoked. The proper filing form from the 990 Series (990-N, 990-EZ, 990, or 990-PF) will depend on your organization’s financial activity. If your organization is small, with gross receipts of $50,000 or less, it will be able to file the 990-N or the “e-postcard.” Filing extensions are not granted for the Form 990-N deadlines, but there are no penalties for late submissions.

It is important to ensure that your organization is filing an accurate and complete annual return, as the IRS regularly conducts compliance checks, looking for appropriate recordkeeping, information reporting, payment of any tax liabilities owed (e.g., employment taxes, unrelated business income tax) and activities that are consistent with the organization’s tax-exempt purpose.

Take note that Form 990 is more than a tax form. It is a marketing tool. Form 990 is a public document readily available on the internet. Donors and other constituents will review Forms 990 to learn about nonprofits they care about or want to support, including information on their missions, accomplishments, finances and more.

Keeping Current with Your State, Too

Every state has its own requirements for nonprofit filings and registrations, but generally speaking, at designated times most charitable nonprofit organizations must:

  • Submit an annual filing that confirms and/or updates the corporation’s basic contact information and agent for service of process;
  • File employment forms with the appropriate state agency if there are any employees;
  • Apply for and maintain state tax exemptions (separate from other corporate registrations), where applicable;
  • Apply for and maintain state and local property tax exemptions, if applicable;
  • If required, register and maintain filings with the state charity regulator and possibly also local jurisdictions if the nonprofit solicits donations, uses professional fundraisers and/or engages in certain other types of fundraising activities.

Note that certain organizations (such as churches, schools or hospitals) may be exempt from some of these state filings depending on each state’s requirements.

Failure to maintain the required state filings can include involuntary dissolution of the nonprofit corporation, suspension of the nonprofit’s right to do business, revocation of state tax exemptions, and penalties for becoming delinquent with state regulators.

We at The Law Firm for Non-Profits realize that many nonprofit leaders have limited time to focus on the many legal regulations their organizations face. We are here to help you navigate the often-confusing maze of state and federal laws.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits,1812 W Burbank Blvd, #7445, Burbank, CA 91506

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