A note about Form 990 filing deadlines in light of the coronavirus (COVID-19) pandemic: On Thursday, April 9, 2020, the IRS extended the filing deadline for Forms 990 originally due between April 1, 2020, and July 14, 2020. The new deadline is July 15, 2020. This extension is automatic and is available for all forms of the 990—Form 990, 990-N, 990-EZ, and 990-PF.
On July 1, 2019, the Taxpayer First Act was signed into law, kick-starting an initiative to redesign the inner workings of the Internal Revenue Service, or IRS. One of its provisions requires nonprofits to file their Forms 990 electronically for tax years that begin after July 1, 2019.
Now you might be thinking, “I just got the hang of filing this form, and now they want to change it up on me?” No worries—you’ll be an e-filing pro in no time. And you just might come to love it!
Read through these 4 topics that are must-knows, and then you will be ready to go.
- What is Form 990?
- What does mandatory e-filing mean for my nonprofit?
- When does e-filing go into effect?
- What are the best options for e-filing?
The answers to these questions will form the foundation for everything you’ll need to know to thrive this filing season. Ready to get started? Read on.
1. What is Form 990?
What makes it so important? Well, here are three of the biggest reasons:
- It is how you maintain tax-exempt status. Your Form 990 is how you prove that your organization deserves to remain exempt from paying federal taxes. By providing financial, mission, and program information, you demonstrate that your nonprofit is indeed working responsibly toward the common good.
- There are penalties for failing to file. A new form must be filed every year, as three consecutive years without submitting a 990 will automatically cause your nonprofit to lose its tax exemption. Additionally, there may be fines imposed for each day the form is late. So, if you want to avoid unnecessary monetary fines, be sure to file your 990.
- Your 990 can improve your nonprofit profile. Form 990 can be an informative tool for your organization’s supporters. A number of websites, including Candid’s 990 Finder and GuideStar database give the public access to nonprofits’ 990s. When donors can see you are handling your funds responsibly, they will be more likely to contribute.
For example, nonprofit advocates require complete transparency concerning the finances and goals of any organization in order to create strong, dependable partnerships. The 990 is the perfect way to do this, as it covers both the financial and missional aspects of your nonprofit.
When you start to think of the 990 as a type of public relations tool instead of just a boring tax form, completing it can become a more meaningful process.
2. What does mandatory e-filing mean for my nonprofit?
The biggest question is always, “But what does this mean for me?” Well, that can vary.
Here are three possible answers, assuming you fit into one of the following groups:
- If you are used to filing a physical copy of your Form 990, you will need to learn this new online process. Maybe you’ve been filing your 990 through the mail for years, so this is going to be a big change. But reading through the next few tips should get you feeling ready as can be.
- If you have already begun to implement e-filing into your tax season agenda, you will just keep doing what you’re doing. Some nonprofits have already used e-filing for years. If your organization is one of them, that just means you’re one step ahead of the game.
- If you are new to filing a Form 990, e-filing just means that you’ll learn the new way! The following tips and tools should be useful to you as you step into the world of the 990 for the first time.
3. When does e-filing go into effect?
If your organization’s tax year began after July 1, 2019 (the day the act was signed into law), then you should already operate under the new Taxpayer First Act. Thus, if you file Form 990 or 990-PF, you are required to submit it electronically.
There are, however, a few exceptions based on which version of the 990 your nonprofit submits.
The following will still be accepted physically this year:
- 990-EZ: The 990-EZ may be filed physically via mail for one more year but then must be filed electronically beginning with the 2020 tax year. E-filing is a simpler process, however, and therefore, your nonprofit should go ahead and get a head start with a certified e-filer.
- 990-T: The 990-T is supposed to be filed electronically already, but physical forms will still be accepted for the time being. The IRS expects them to be submitted solely electronically by the time you file for the 2020 tax year.
As we begin this transition to electronic filing, it may be a little daunting. Keep in mind that you are not alone in this process, and there are a plethora of tools and resources available for assistance.
4. What are the best options for e-filing?
With all these changes afoot, you may want to consider using an e-filing software program. Such programs can streamline the filing process to make things as simple as possible for you and your nonprofit.
E-filing software can solve problems for you before they even occur, by ensuring the completeness and timeliness of your forms, thus saving you the hassle of dealing with fines and other penalties.
So what are your options here? The IRS lists approved e-filers on its website. Check the list to find the software solution that works for your organization!
Filing your 990 could be overwhelming even before the new filing requirements, but armed with the right knowledge and tools, you will soon be an e-filing expert. These four essentials will ease your transition into the new filing process and ensure a successful electronic filing experience.