An exempt or non-profit organization (EO) is a corporation or civic organization that is exempt from federal income tax under different sections of IRC 501. To be exempt from income tax, an activity has to be in line with the organization’s main purpose. Some of these organizations may also be exempt from Federal Unemployment Tax (FUTA) as well.
As a result of their exempt status, EOs have strict and detailed filing requirements. All EOs regardless of their size have to file a return. However, the type of return they file differs based on the gross receipts of the organization. Most common filing is the Form 990. Form 990-EZ, a shorter form of the return is available for smaller organizations. Organizations with less than $50,000 gross receipts must file Form 990-N to avoid having their exempt status revoked by the IRS.
IF an organization has business income that is not related to its main purpose, the Form 990-T for Unrelated Business Income has to be filed. Net profit on that return is subject to taxation. Nonprofits are not exempt from payroll taxes and state unemployment taxes. Failure to pay these taxes will result in severe penalties and interest payments.
Form 990 is one of the most complicated tax returns in the federal tax return universe. It is of crucial importance to have a knowledgeable tax professional or accountant to prepare these returns to avoid penalties or even revocation of exempt status. Global Tax Consulting employs accountants who specialize in exempt organization returns with more than 65 years of combined experience.
