Raise your hand if you do your best to avoid working on nonprofit tax returns. If your hand is up then you are in the majority. Most tax partners, managers and staff avoid them like the plague.
The 990 tax forms are very different from individual and business tax returns and ask a lot of informational questions. As a result, they can absorb a lot of the firm’s time and expense. In addition, since the entity is a charity, it is likely that they will ask for rock bottom prices or ask you do to the tax return as a charitable donation.
Ok, then why does the firm do them?
Usually, it is because the nonprofit tax return is connected to a larger tax or audit client. Technically, the firm could pass on preparing the tax return. But they know that it is not in the accounting firm’s best interest. Therefore, they pass nonprofit returns down to the preparer level hoping to get it prepared as cheaply as possible.
However, if the §501(c)3 organization (the main IRS code section for charities) has an average of $50,000 in gross receipts or less then there is a much easier option. Instead of filing a Form 990 or 990-EZ return, the tax preparer or the client can file a Form 990-N tax return. The tax return is filed online at the following address. http://epostcard.form990.org/ (there is no paper form that can be filed).
The only financial information required is indicating that the organization meets the gross receipts test. The other information is only general data about the organization (e.g., name, address, EIN). The tax return only takes about five minutes to file.
Within a day after filing the tax return the person filing the tax return will receive an e-mail confirmation from the IRS that the tax return has been accepted. This return can be filed for every year that the organization meets the test. However, it should be noted that this return cannot be filed for a private foundation that needs to file the 990-PF tax return.
Let me know in the comments section your experiences with filing the 990-N tax return as well as any other topics that you think that I should explain about exempt organization tax returns.
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