This is the season that the IRS sends generic notices to exempt or nonprofit organizations as a reminder to file federal form 990-N. Unfortunately, this can be confusing for several reasons, the most important of which is that many organizations are not required to file 990-N.
To be sure, an IRS notice can make anyone uncomfortable, especially in light of recently reported events. Couple that with the complexities of nonprofit reporting and you certainly have a recipe for confusion. Consequently, this is a perfect time for a basic review of governmental compliance: What to file, and when. First, the caveats:
This discussion will focus annual reporting requirements for organizations that reside and operate within Illinois. If your organization has a presence in multiple states, or if you solicit contributions across state lines, you will likely have additional filing requirements with other states. Also, I won’t be discussing payroll and excise taxes – no way to fit everything in one column!
Many associate tax-exempt organizations with Internal Revenue Code Section 501(c)(3). This is your basic public charity or private foundation, both of which may solicit and receive charitable contributions that are tax-deductible to the donor. However, there are many different types of exempt organizations under 501(c), not all of which are granted the privilege of soliciting charitable contributions. For example, most business leagues are organized under Section 501(c)(6), and social clubs are organized under Section 501(c)(4). While such organizations may operate without paying federal and state income taxes, typically they may not solicit tax-deductible contributions. Your IRS tax determination letter will indicate the type of organization.
Now for the “Powers That Be” – the governmental agencies to which your nonprofit must report annually:
1. Illinois secretary of state: Most organizations operate as not-for-profit corporations. As such, they are required to file an Illinois Corporate Annual Report. This very brief form is due on the corporate anniversary (the anniversary of the date it became a corporation) along with a $10 filing fee. Be sure to list all current board members of the organization when you complete this form.
2. Internal Revenue Service: Almost every organization must file annually with the IRS. Private foundations file form 990PF. Other organizations file either form 990, 990EZ or 990-N, as determined by gross revenues (defined as all revenues from all sources derived) and total assets:
• For gross revenues of $50,000 or less, you can file the brief 990-N, online, at IRS.gov;
• Form 990EZ is for gross revenues of $50,001-$200,000 and assets of $500,000 or less; and
• Form 990 is required for gross revenues and assets of more than $200,000 and $500,000, respectively.
There are some exceptions to these general requirements so it is advisable to consult your accountant. The filing due date for all forms 990 is 4½ months after the fiscal year end. For example, if your year end is Dec. 31, the 990 filing due date is May 15.
3. Illinois attorney general: Virtually all 501(c)(3) organizations must register and file annually with the IAG. Audited financial statements are a required attachment when gross revenues exceed $300,000, and that filing threshold is reduced to $25,000 if the organization hires a professional fundraiser. Remember, a business league or social club may not have these filing requirements because these organizations typically do not solicit charitable contributions. Report on form AG990-IL along with a $15 annual filing fee. The report is due six months after the fiscal year end. For example, if your year end is Dec. 31, the filing due date is June 30.
Just as individuals file annual tax returns, nonprofits also have annual filing requirements. Nonprofit leaders should be aware of these filing requirements so they can organize records and consult their accountant to ensure timely compliance – and so they don’t worry when the IRS sends an erroneous notice!
• Nancy Gonsiorek is a Certified Public Accountant providing audit, tax and consulting services to nonprofit organizations. Her firm, Nancy L. Gonsiorek, CPA, LLC is based in Crystal Lake. She can be reached at 815-455-9462 or via email at NancyGonsiorek@comcast.net.