Nonprofit tax tips and filing reminders
You launched a nonprofit in 2015. You know you’re supposed to file taxes. But which ones?
This checklist, from my book Starting Your Nonprofit: A Workbook to Guide You Through a Million Exciting Tasks, outlines the 4 state forms and 1 federal form you need to file. Idle Tuesdays Recording Studio, the nonprofit I founded, is in Los Angeles; so, I’ll be focusing particularly on California state filings.
Regardless of which state your nonprofit is in, you’re required to file a Form 990 tax return with the IRS (below), in addition to state filings.
2015 Instructions for Form 990 Return of Organization Exempt from Income Tax
Filing Requirements for California Nonprofit Organizations
1. Secretary of State
Statement of Information Form SI-100
File this form online in minutes. Start by entering your corporate number. The site will recognize your corporate number and will prompt you to confirm your corporate address and the names and addresses of your corporate officers (Chief Executive Officer, Secretary, and Chief Financial Officer).
Protect the privacy of your corporate officers by listing your corporate address. This form will become “public information,” which means a number of nonprofit websites will make it available for anybody to view. When given the opportunity to get a copy of the completed form, take it. Save it with your other corporate documents.
Filing fee: $20
2. Franchise Tax Board
Option 1: Form 199N Annual Electronic Filing Requirement for Small Tax-Exempt Organizations (California e-postcard)
This tax return is for nonprofits with less than $50,000 in annual gross revenue.
It’s due by May 15 if December 31 is the last day of your accounting period…which it probably is. Be prepared to provided your corporate number, Federal Employer Identification Number (FEIN), mailing address, accounting period beginning and ending date (again, it’s probably January 1 – December 31), your website, annual gross receipts, and the name of the person completing the form.
Filing fee: $0
Option 2: Form 199 Exempt Organization Annual Information Return
This tax return is for nonprofits with greater than $50,000 in annual gross revenue.
It must be snail mailed and is due by May 15 if December 31 is the last day of your accounting period…which, again, it probably is. Be prepared to provide the same information as Form 199N, plus some addition financial details. The state of California wants to know about your income, expenses, assets, and liabilities. Answer completely and honestly.
Filing fee: $10
The following organizations do not need to file Form 199N or Form 199:
- Churches, inter-church organizations of local units of a church, conventions or associations of churches, or integrated auxiliaries of churches.
- Religious orders (such as Franciscan Friars or Sisters of Charity).
- Organizations formed to carry out a function of a state or public body that is carrying out that function and is controlled by the state or public body.
- Political organizations.
- Pension trusts.
- Coverdell Education Savings Accounts (ESAs), formerly called education IRAs.
- Qualified state tuition programs.
- Subordinate organization included in the parent’s group return.
3. California State Board of Equalization
Sales & Use Tax Return
Create an account by registering with the California State Board of Equalization. You’ll receive a user ID and password. After you have your user ID, password, and Seller’s Permit number, you can file your sales and use tax return.
Smaller nonprofits typically file their sales and use tax returns annually, but if you’re unsure how frequently you should be filing, contact the Board of Equalization.
Be prepared to provide your gross sales amount, deductions, exemptions, district tax, and the name of the person filing the form. Answer completely and honestly, with supporting financial documents on hand, in case your return is audited. If you owe anything, you’ll be given the opportunity to pay with your bank account or a credit car.
After you’ve submitted the form, you’ll receive a confirmation number. Save a copy with your corporate records.
Filing fee: To be determined
4. Attorney General, California Registry of Charitable Trusts
Annual Registration Renewal Fee Report Form RRF-1
All California nonprofit organizations must be registered as a charity before you can file. After you have your charity number, you can download, print, complete and snail mail this simple, short return.
Be prepared to provide your charity number, corporate number, Federal Employer Identification Number (FEIN), mailing address, your accounting period (which is, again, probably January 1 – December 31), annual gross revenue, total assets, and the name of the person filing the form.
Additionally, there are 9 “yes” or “no” questions. Answer honestly. Answering “yes” to any of the these questions will require additional explanation.
Filing fee: $0 for organizations with less than $25,000 in annual gross revenue.
Federal Filing Requirements for U.S. based Nonprofit Organizations
Internal Revenue Service
The IRS offers three Form 990 options. Annual gross revenue determines which form to complete. Remember, these documents will be made available to the public, so avoid using personal information.
Option 1: IRS Form 990-N (less than $50,000 annual gross revenue)
A message from the IRS:
To file 990-N on or before February 28, 2016: The Urban Institute will continue to host Form 990-N at http://epostcard.form990.org/ until February 28, 2016. If you file your organization’s tax-year 2015 990-N on or before February 28, 2016, you won’t be required to register for the new Form 990 submission process at IRS.gov until you file your tax-year 2016 Form 990-N in 2017.
To file 990-N on or after February 29, 2016: The IRS will begin hosting Form 990-N on February 29, 2016. All form 990-N users (including users previously registered with Urban Institute) who file after February 28, 2016, will be required to register before completing the 990-N. This is a one-time registration. You won’t need to register each year.
In the unlikely event that technical issues delay implementation of the new Form 990-N submission process, systems are in place to prevent organizations from being penalized if their filing due dates occur before the system is in place. To avoid this, please consider filing your 2015 return prior to February 29.
IRS Form 990-N takes a few minutes to file online. Provide your Employer Identification Number (EIN), accounting period, corporate name, mailing address, the name of your principal officer, website, annual gross receipts, click submit and be on your way.
This version is so quick and easy to file you’ll be done before your coffee gets cold.
Option 2: IRS Form 990-EZ (less than $200,000 annual gross revenue)
Download, complete and snail mail this 4 page form if your annual gross revenue is between $50,001 – $199,999. Be prepared to provide basic contact details, accounting method, plus revenue, expense and asset details.
Part III requires applicants to Describe the organization’s program service accomplishments for each of its three largest program services, as measured by expenses. In a clear and concise manner, describe the services provided, the number of persons benefited, and other relevant information for each program title.
You have 3 lines to describe each program, so practice writing and re-writing your answers to reduce your descriptions into one or two sentences.
Part IV requires applicants to list the names of officers, directors, trustees and key employees. Simple.
Part V asks applicants to answer 13 “yes” or “no” questions.
Option 3: IRS Form 990 (greater than $200,000 annual gross revenue)
Your coffee will be cold by the time you complete this version.
Download, complete, and snail mail this 12 page form; it’s the most thorough version for the form. Because it’s so detailed, I’m only including the titles of each part below. Take your time, collect the necessary supporting documents, and answer each question honestly.
2015 Instructions for Form 990 Return of an Organization Exempt from Income Tax
Part I: Summary of activities, governance, revenue and expenses
Part II: Signature block (where the person completing the form writes their contact information)
Part III: Statement of program service accomplishments
Part IV: Checklist of required schedules (38 questions)
Part V: Statements regarding other IRS filings and tax compliance (14 questions)
Part VI: Governance, management, and disclosure (20 questions)
Part VII: Compensation of officers, directors, trustees, key employees, highest compensated employees, and independent contractors
Part VIII: Statement of revenue (12 questions; contributions, gifts, grants, and program service revenue)
Part IX: Statement of functional expenses (26 questions)
Part X: Balance sheet (34 questions; assets, liabilities, and net assets or fund balances)
Part XI: Reconciliation of net assets (10 questions)
Part XII: Financial Statements and reporting
Save a copy, and supporting financial documents, with your corporate records. You never know when the IRS will come knocking.
You have what it takes. You’re smart enough. You’re good looking enough. Your personality is enough! Continue filling those gaps and solving those problems! You’re the solution!