IRS Deadline Approaches, Are You Prepared?
By Raul Rivera
It is hard to believe the speed with which this year is passing. Before we know it, 2016 will have come and gone and we will be celebrating a new year. Already this year, we have had some important dates come and go pertaining to taxes at both a corporate and individual level. The most obvious date was the April 18th deadline to file income taxes, and believe me when I say that I am just as happy as you are that that day has come and gone.
However, we have a tendency to shift into cruise control this time of year. Many churches and ministries are getting ready for the summer months and activities. Many pastors and ministry leaders are beginning to smell the salt water of the beach and are looking forward to a well-deserved vacation. But before you look too far ahead, there is another important tax date about which you and your ministry need to be aware.
Although tax-exempt organizations are exempt from paying income taxes, they are required to file an annual income tax return in order to maintain tax-exempt status. That tax return is known as Form 990.
Here is what you need to know about Form 990
The requirement to file Form 990 comes to us from section 6033(a)(1) of the Internal Revenue Code, which states,
“Except as provided in paragraph (3), every organization exempt from taxation under section 501(a) shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws...”
Therefore, if you operate any kind of ministry or regular nonprofit organization, then you must file Form 990 on a yearly basis. This includes, but is not limited to, organizations such as outreach ministries (CDCs), traveling evangelistic ministries, after school youth centers, daycares, transitional housing programs, holdings corporations, and many more.
Only churches are exempt from having to file Form 990 on a yearly basis with the IRS. This is often one of the misunderstood facts about the Form 990 requirement, but is one that is imperative to understand and remember.
Throughout the remainder of this post we will be addressing Form 990 requirements as they pertain to ministries and other charitable organizations. However, if you are a pastor or church leader, do not be quick to discard this post, thinking that this does not pertain to you; for as Solomon wrote in the book of Ecclesiastes, “There is a time for everything.” The truth of the matter is that there may soon come a time when God leads you and your church to begin a separate ministry.
“A time to plant and a time to uproot”
As previously mentioned, this post will address some requirements of Form 990 as they pertain to ministries and other charitable organizations. However, in order to put things into perspective, let us take a look at an example story:
Having a heart to reach those outside of the four-walls of the church, Pastor Lawrence decided to start an outreach ministry in August of 2015. By the end of September, Pastor Lawrence had already received the employer identification number (EIN or FEIN) for the ministry and its approved incorporation status with the state of Tennessee.
Since it was a new ministry organization, Pastor Lawrence decided that he would wait to apply for its 501(c)(3) status. He figured that he would give the ministry about a year to grow and mature before applying for 501(c)(3) status so that they would not have to worry about dealing with the IRS.
But what he did not know was that whether he applied for the ministry’s tax-exempt status now or a year from now, there was another form that he would need to submit to the IRS on behalf of the ministry within just a few short months - Form 990.
Although this is a fictional story used to help paint a picture, it is not that far off from where many ministries find themselves today. There is a knowledge gap with ministry leaders when it comes to the Form 990 requirements. My hope is that this post will help close that gap for many.
What happens if I miss the deadline?
Perhaps your ministry has been around for a year or two and you have yet to file a Form 990. What are you supposed to do? Well, the good news is that it is not too late and you can still file by the May 15th deadline without any repercussions.
The issues with not filing your ministry’s 990s arise when you do not file your ministry’s Form 990 for three consecutive years. When we take a further look at section 6033, it tells us that organizations that fail to file Form 990 for three consecutive years will receive an automatic revocation of their tax-exempt status.
This is true even if your ministry has not yet applied for its 501(c)(3) tax-exempt status. In this instance, it will end up costing your ministry more in the long run. That is why we encourage each and every ministry to begin making it a practice to file Form 990 as early in the life of the ministry as possible.
3 simple steps to keep your ministry on track
You do not have to be caught off guard with an automatic revocation. You can, however, be equipped to handle the Form 990 filing requirements successfully and protect your ministry’s tax-exempt status by using the following guidelines.
1. Determine if your organization is required to file Form 990. Remember, churches do NOT have to file 990 tax returns. However, all Christian, non-church (para-church) ministries are required. Private foundations are always required to file a particular 990 specifically for private foundations no matter how much they receive in donations.
2. Determine what type of 990 you are responsible for filing. There are several variations for the Form 990 annual informational return. They are listed below:
- 990N (the e-Postcard): A 990N is an electronic notice. Organizations with gross receipts of normally $50,000 or less will file this electronic notice.
- Form 990 EZ: Form 990EZ is also referred to as the short form. Organizations with gross receipts of normally more than $50,000 but less than $200,000, and whose assets are valued at less than $500,000, are required to file this form.
- Form 990, also know as the long form: Organizations whose gross receipts are on average $200,000 or greater, and whose assets are valued at $500,000 or greater, are required to file Form 990.
3. Know your deadline for filing Form 990. All 990 filers are required to submit their returns by the 15th day of the 5th month of their fiscal year. For most organizations, their fiscal year coincides with the calendar year (January - December). If your fiscal year ends on December 31st, then your Form 990 will be due by this coming Friday, May 15th. If your fiscal year ends June 30th then you will be required to file your Form 990 by November 15th of the same year.
What you can do today
Understanding the world of nonprofit compliance, tax law, and all that is required of you is a difficult task in and of itself. This is especially so when you are managing and operating multiple organizations, but it does not have to be that way.
Perhaps you are a pastor of a church and this post does not directly relate to you at this time, but you know someone who would benefit. If that is the case, I encourage you to share this post with that person and even invite them to attend one of our conferences with you.
If, on the other hand, you do need assistance determining which Form 990 you should use, or assistance meeting the deadline by May 15th, please give our office a call at 770-638-3444 and one of our highly trained staff members will be glad to serve you and your ministry