Everything your nonprofit needs to know about tax returns

Here at Baylor Headquarters, we are getting our nonprofit clients ready for tax season. For that reason, we wanted to share questions we often receive from our clients:

My nonprofit doesn't pay taxes. Why do I need to file a tax return?

Although nonprofits don't pay taxes on their income, the IRS still wants to keep an eye on things to make sure the nonprofit is still following its mission. For this reason, all nonprofits are required to file a tax return. The type of tax return you have to file depends on how much money your nonprofit received last year. 

If your nonprofit earned $50,000 or less last year, then you'll file an IRS Form 990-N. This form is quick and easy - only requiring 8 items of information. (Read below for more information about this form).

My nonprofit was registered (or will be registered) this year. Do I still need to file a return?

No. A nonprofit must complete a tax year before filing a return. You will be required to file your first return next year, in 2018.

What is the name of the form I need to file?

If your nonprofit made $50,000 or less last year, you need to file IRS Form 990-N. This form is filed online and only requires 8 items of basic information:

  1.  tax identification number
  2.  tax year
  3.  legal name and mailing address
  4.  any other names your organization uses
  5.  name and address of the principal officer (e.g., Director or CEO)
  6.  website (if applicable)
  7.  confirmation that the nonprofit made $50,000 or less in the last tax year
  8.  if applicable, a statement that the nonprofit will be discontinued

If your nonprofit made more than $50,000 last year, it is required to file a longer form - IRS Form 990 or IRS Form 990-EZ. This requests more information about the donations received and programs that the nonprofit is running. 

When is the return due?

In general, the tax return is due no later than May 15th. The IRS does allow a 6-month extension. 

What happens if I don't file a return?

Not filing a return can have negative consequences for the nonprofit. If the nonprofit doesn't file for 3 consecutive years, the IRS automatically revokes the nonprofit's tax exempt status. This means the nonprofit will have to start paying taxes on income it receives. It will also have to let donors know that donations made are not tax-exempt. The IRS periodically publishes a list of nonprofits with revoked status.

Furthermore, donors often look online to make sure nonprofits are properly filing their tax returns (for example, the Guidestar website posts public information about nonprofit tax returns).

If you have any specific questions about your nonprofit's requirement to file a tax return, please feel free to get in touch by e-mailing info@beabaylor.com.

Standing for the success of your nonprofit!