Many Nonprofits Must File IRS Form 990-N to Stay Tax-Exempt

Every year, most small nonprofits must file an "e-postcard" with the IRS: IRS Form 990-N. Congress enacted this filing requirement in 2007 to keep the IRS up to date on new business addresses and changes to other key information for small nonprofits. The 990-N form has enabled the IRS to create an up-to-date database with basic information on all active nonprofits: the IRS online Tax Exempt Organization Search (TEOS) tool. This is important both for IRS administrative purposes and for donors who want to make sure they are contributing to recognized nonprofits.

Who Must File Form 990-N?

All nonprofits with gross receipts "normally" under $50,000 must file Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required To File Form 990 or 990-EZ. Your receipts will satisfy the "normally" requirement if they averaged $50,000 or less in the prior three consecutive tax years, including the year in which the return would be filed.

A nonprofit that is less than a year old can file a Form 990-N if it received, or donors have pledged to give, under $75,000 during its first tax year. For a nonprofit between one and three years old, it can file Form 990-N if it averaged $60,000 or less in gross receipts during each of its first two years. Alternatively, such nonprofits can choose to file the much more complex IRS Form 990 or 990-EZ. There are exceptions to this filing requirement for:

• organizations that are included in a group return, and
• churches, their integrated auxiliaries, and conventions or associations of churches.

When is Form 990-N Due?

Form 990-N is due every year by the 15th day of the 5th month after the close of the nonprofit's tax year. This is May 15 for most nonprofits, which use a calendar year. You cannot file Form 990-N until after your nonprofit's tax year ends. If your 990-N is late, the IRS will send a reminder notice to the nonprofit's last address in its records.

How to File Form 990-N

Filing Form 990-N is so simple that, technically speaking, the IRS doesn't even consider it to be a tax return. It should take you no more than ten or 15 minutes to complete. You don't even need to pay for a postage stamp to mail it to the IRS, because it must be sent electronically -- paper copies of the form will not be accepted. This is why the IRS calls the form an "e-Postcard." Form 990-N is filed online through the IRS Form 990-N Electronic Filing System web page. A one-time registration is required to access the IRS system.

You do not need any special software, just access to the Internet and an email address for your nonprofit. You then complete an online form that asks for your nonprofit's legal name, address, website address (if any), EIN, name and address of a principal officer (usually the president, vice president, secretary, or treasurer), and tax year (either the calendar year or a non-calendar fiscal year). You will also be asked whether your nonprofit has terminated or gone out of business.

If your Form 990-N was accepted, your nonprofit's electronic filing will be listed on the IRS Tax Exempt Organization Search (TEOS) tool. Allow up to four weeks for the TEOS system to display your filing.

For more information on filing Form 990-N see the IRS website's highly detailed Form 990-N information page.

What If You Don't File Form 990-N?

The IRS is really serious about getting all small nonprofits to file Form 990-N. If you don't file the form for any single year, the IRS will merely send your nonprofit a reminder notice. But if you fail to file your Form 990-N year after year, things will get tougher. If your nonprofit is required to file Form 990-N but fails to do so for three consecutive tax years, it will automatically lose its tax-exempt status on the filing due date of the third year. For example, if your first Form 990-N is due on May 15, 2020 (for tax year 2019) and you do not file in 2020, 2021, or by May 15, 2022, your nonprofit will lose its tax-exempt status on May 15, 2022. The IRS will not send additional notices once your tax-exempt status is automatically revoked.

If your nonprofit loses its tax-exempt status, it cannot receive tax-deductible contributions. It will be included in the IRS List of Automatically Revoked Organizations. Contributions donors make to such a nonprofit after the date its name was published on the IRS list of automatically revoked organizations are not tax deductible.

Your nonprofit will have to apply for a federal tax exemption all over again. That means filing IRS Form 1023-A (or Form 1023) again and paying the hefty filing fee that comes with it (not to mention the headache of all that unnecessary paperwork). Fortunately, the IRS has a created a special procedure to help small nonprofits that lost their tax-exempt status due to failure to file Form 990-N. A small nonprofit can have its tax-exempt status retroactively reinstated to the date of revocation if it:

• did not previously have its tax-exempt status automatically revoked, and
• completes and submits IRS Form 1023-EZ (or Form 1023) with the appropriate fee no more than 15 months after the later of (1) the date of the nonprofit's revocation letter (CP-120A), or (2) the date the nonprofit appeared on the Revocation List on the IRS website.

For detailed guidance, see the IRS web page Automatic Revocation-- How to Have Your Tax-Exempt Status Retroactively Reinstated.

For more information on filing nonprofit tax forms, see Every Nonprofit's Tax Guide: How to Keep Your Tax-Exempt Status and Avoid IRS Problems, by Stephen Fishman (Nolo).