Tax Attic: Tax preparation is controlled by due dates

The world of tax preparation is controlled by due dates. If you work in that world, as I have since 1978, you do get used to it. The most important one always comes in April and it usually is the 15th when all individual tax returns are due in addition to many corporate tax returns. The last couple of years we have been in a bit of a cycle where the 15th has fallen on a weekend or a holiday so we have received a couple of extra days. Since I have a personal philosophy of not looking a gift horse in the mouth, I will take whatever extra days the IRS will give us. Once we get over these years of abnormality, though, we will go back to April 15. The month of May has it’s own share of deadlines, of course. The most important one comes on May 15 and deals with those non-profit entities who have to file one of the 990 series of tax returns. In this case, non-profit entities would be organizations that have successfully applied to the Internal Revenue Service for non-profit status under a variety of IRS Code Sections. A requirement of being approved for that non-profit status is having to file a 990 tax return. Except for unusual circumstances, the non-profit would not owe any tax. For the most part, in our tax system, no tax means no penalties for filing a return late. That being said, the IRS came up with a different set of penalties for filing a return late that apply only to non-profits. First, there is a monetary penalty that is based on when the actual return is filed. Every day the return is filed after May 15, the penalty is $20. The maximum penalty is the lesser of $10,000 or 5% of the gross receipts of the organization for the year. This penalty can be waived if the organization can make a good case that the return wasn’t filed due to a reasonable cause. Like most returns, there is an automatic extension that will be granted allowing the return to be filed up to November 15 without penalty. Second, there is a penalty if the non-profit doesn’t file a return for three consecutive years. That penalty can be quite severe in that the tax-exempt status of the entity can be revoked. If revoked, there is quite a lengthy and involved process that must be followed to get that non-profit status re-instated.

The 990 series of forms runs from the very simple to the very complicated and is based on the gross receipts of the entity. For non-profits with gross receipts of $50,000 or less, the filing requirement consists of the on-line electronic filing of a form called the 990-N. The filing consists of answering a few questions and checking a box that the entity meets the $50,000 or less requirement and meets the on-going non-profit requirements. The entity can elect to file one of the more complicated versions of the 990 but I haven’t encountered any entity making that election. A further point is that the $50,000 is the average for the present and previous last two years. This allows a start-up non-profit or a non-profit that receives a larger than normal grant to perhaps still stay under the $50,000 limit even though in one particular year, it is over that $50,000 gross receipts line. Non-profits with more than $50,000 but less than $200,000 and less than $500,000 in total assets may elect to file a 990-EZ or a 990. The 990-EZ is four pages in length but it may have several additional pages of explanatory schedules. Non-profits with at least $200,000 of income or at total assets of $500,000 or more must file a 990. The 990 is twelve pages in length plus multiple explanatory schedules. Each of those twelve pages takes some time to complete. The 990 definitely takes more time and expertise to complete than the 990-EZ or the 990-N.

This is Jerry Coon signing off.

Jerry Coon is an Enrolled Agent.

He owns Action Tax Service on Northland Dr in Rockford.

Contact Jerry at