E-Filing Your Nonprofit Taxes During the COVID-19 Outbreak

The following is a guest post from File990, a software provider specialized in helping nonprofits track, complete, and e-file their annual Form 990 to maintain tax exemption.

So far, 2020 is shaping up to be quite an unpredictable year. The COVID-19 crisis has significantly impacted individuals, businesses, and organizations around the world in unimaginable ways. As a nonprofit professional, you’re likely aware of the various ways the pandemic has turned nonprofit strategies for both fundraising and programming upside down. Maybe your organization is struggling to pursue your mission in a turbulent time.

One aspect you might not be so familiar with, however, is the way that the coronavirus has shifted nonprofit tax regulations for the year. As you know, nonprofit organizations are required to file an annual IRS Form 990 to maintain tax-exempt status and stay compliant.

While filing your taxes is likely not at top of mind in the midst of a global pandemic, it’s important that you don’t let it fall through the cracks. Otherwise, you risk facing the negative consequences of a late or missing tax form— including substantial fines and, eventually, a loss of tax exemption.

As we walk through an unusual tax season, it’s likely that you’ll have some pressing questions concerning deadlines, updates, and top tips. That’s why we’ve put together this quick guide here at File990 to help as you adjust to these new practices. You might be asking yourself the following:

  1. What has changed in response to COVID-19?
  2. How do I file my nonprofit taxes?
  3. Why should I file electronically?

We’ll answer these questions and more to better prepare you for filing your nonprofit taxes even amid a crisis. Ready to get started? Let’s jump in.

1. What has changed because of COVID-19?

As new tax codes are released, it’s important to keep updated, lest you risk missing out on important information. Even before the coronavirus outbreak, substantial changes were made requiring every organization to begin e-filing their annual nonprofit taxes— as opposed to a traditional mail-in version.

Now, it’s more important than ever to keep up with IRS updates in response to COVID-19. While staying up to date with the latest coronavirus updates and resources can be difficult, especially when there seems to be new information released every day, it’s essential for maintaining a healthy organization.

Here are the two biggest things to know regarding coronavirus updates and nonprofit taxes:

  • The tax form deadline has been extended. The typical rule regarding nonprofit tax deadlines is that a Form 990 is due on the 15th day of the 5th month following the conclusion of an organization’s fiscal year. For organizations following the calendar year, this means forms are due on May 15th of the year. However, due to extenuating circumstances, the IRS has granted an automatic extension for all Form 990’s until July 15th. So, if you have yet to complete your nonprofit tax forms, you still have time! But this doesn’t mean you should wait until the last minute. It’s always better to get tax forms completed earlier rather than later.
  • You can file for a further extension. If you’re worried about getting your forms submitted in time even with the extended deadline, you can always file for another extension. By completing IRS Form 8868 (which can be completed electronically for your convenience), you can request a 6-month extension of the deadline, bringing your new due date as late as January 15th.

Due to the turbulence caused by the global pandemic, the IRS is giving nonprofits like yours a little extra wiggle room to get their tax forms completed without penalty. Many nonprofits are struggling to keep their doors open during this time, and the automatic extension can be a great way of relieving some of that stress. However, it’s important that you don’t put off filing for too long or neglect filing altogether!

Now that you have a better understanding of the updated deadlines and what that means for your organization, it’s time to walk through the basics of the Form 990 process.

2. How do I file my nonprofit taxes?

Tax forms can seem quite intimidating. For nonprofit organizations and the professionals within, filing your Form 990 might be a daunting task— especially if you’re new to the sector. That’s why many nonprofits turn to accounting professionals for assistance. However, according to File990, many organizations can get by quite easily even without the help of an accountant to file their tax forms.

The first step in filing your nonprofit taxes is to determine which form is required of you. While most nonprofit organizations will file some version of Tax Form 990, there are a few different types to choose from. Here are the four main forms and the distinctions between them:

  • Form 990: The standard Form 990 is the full nonprofit tax form. This will be completed by organizations with gross receipts of more than $200,000, or total assets more than $500,000. However, smaller nonprofits that may be eligible for a shorter form are able to file this full return if they so choose.
  • 990-EZ: The 990-EZ is a shorter version of the full 990. To be eligible for this form, a nonprofit must gross receipts of less than $200,000 and total assets of less than $500,000.
  • 990-N: The 990-N is the shortest version, and as such is referred to as the 990 Postcard. Only the smallest organizations are eligible to complete this form, with gross receipts of less than or equal to $50,000 per year.
  • 990-PF: The 990-PF is the form dedicated to private foundations of all shapes and sizes, regardless of financial status.

Then, based on which form your organization is eligible for based on your gross annual receipts (or type of organization), you’ll follow the step-by-step instructions provided by the IRS. If you’re still concerned about filing your taxes accurately and on time, investing in nonprofit software might be the best way to go.

For further research, take a look at this guide to Form 990 software from re:Charity to find the best solutions for your organization. Plus you can check out some of our top tips for filing your nonprofit taxes here!

3. Why should I file electronically?

In recent years, many organizations have made the switch to e-filing their nonprofit taxes for one reason or another. While traditional tax forms have been completed by hand and sent via direct mail, new technology allows organizations of all sizes to file digitally.

If you’ve yet to make the jump, we highly recommend you do that this year. After all, electronically filing your nonprofit taxes provides the following benefits (and more):

  • Budget-friendliness: A significant aspect of running a successful nonprofit organization lies in maintaining an effective budget. Now, with a looming economic crisis ahead, this is more important than ever. That’s why saving substantial amounts of money on an unnecessary accountant for your taxes is a great idea!
  • Convenience: Filing your taxes electronically is more convenient than ever! With no need to worry about stamps and envelopes, you can have your tax forms sent directly from your computer to the IRS in mere seconds. Plus, by making use of an IRS-certified e-filer, they can carry information over from year to year, meaning fewer fields to complete as you go along.
  • Transparency: When it comes to effective fundraising practices, transparency is key. After all, donors are not likely to give to an organization they don’t trust to use charitable contributions responsibly. Luckily, that’s one reason the IRS Form 990 is made available to the public. By making your tax forms available for potential donors to investigate, supporters can see exactly where your money— and their gifts— are going.
  • Security: While some users might be concerned about the security of e-filing programs as opposed to physically mailing a form, the truth is that e-filing is a much safer option. And because your forms are made publicly available, it’s important that you leave out any sensitive or confidential information— and your certified e-filing software can help with that by explicitly stating what is and is not required.
  • Up-to-date regulations: As previously mentioned, the Taxpayer First Act signed in July 2019 means that all nonprofits will be filing electronically within the next few years. Since the Act has already been passed, most organizations are expected to begin filing electronically this year. However, the IRS will continue to accept paper filings for the next year or so as they work through the transition to new digital practices. Either way, you might as well get started now!

Whether you’ve been e-filing for years or this is your first time, these benefits are important to keep in mind as you walk through the nonprofit tax process. Understanding the reasoning behind the task can make it seem less like a chore and more like a useful contribution to the organization.

When you have the right resources, e-filing your nonprofit taxes can be a breeze— even in the midst of a pandemic. All you need to do is stay up-to-date with the latest tax regulations, explore the best software solutions, and employ guides like this one to walk you through the process. Good luck!