The IRS mandates that nonprofit entities file either Form 990 or Form 990-EZ when it comes to tax filing. While both forms have the same objective, businesses must be aware of certain significant variations between them in order to choose which form to submit.
The full version of the tax form, Form 990, calls for the most thorough financial data. Larger nonprofit organizations with annual gross income of $200,000 or more and total assets of $500,000 or more are more likely to file it. Contrarily, Form 990-EZ is a condensed version of the form that is accessible for businesses with gross receipts under $200,000 and total assets under $500,000.
The amount of information that must be revealed is one of the main distinctions between the two formats. An organization’s operations, including program service accomplishments, governance, and the pay of executives and key personnel, must be detailed in Form 990. Less information is needed on Form 990-EZ, but organizations must still report on their program service successes, revenue, and expenses.
Nonprofit organizations may find it difficult to choose which form to submit, especially if they are getting close to the $200,000 gross receipts barrier. It may be advantageous for organizations to submit Form 990 even if it is not required because it might provide them more credibility and transparency with potential funders and donors.
What occurs if a nonprofit does not submit a Form 990, in addition? An organization’s tax-exempt status will be automatically revoked by the IRS if Form 990 is not filed by it for three years in a row. The organization may suffer severe repercussions as a result, including a reduction in funding and donations as well as significant obligations in the legal and financial spheres.
In conclusion, based on their financial circumstances and organizational objectives, nonprofit organizations must carefully choose which form to submit. Organizations can make sure they are in compliance with IRS rules and keep their tax-exempt status by comprehending the distinctions between Form 990 and Form 990-EZ.