Form 990
It is a relief for many organizations to learn
that IRS Form 990, the annual "Return
of Organization Exempt From Income Tax,"
is not required when gross receipts are less
than $25,000. It might be a better idea to
file a "blank" Form 990, than to
not file at all:
1) In some cases, the IRS deletes organizations
that do not file from their annual list of
qualified charities (Pub. 78).
2) The annual 990 is a very good way to notify
the IRS of changes in your organization's
address, etc.
3) Filing a blank Form 990 gives your organization
a "paper trail." When a new president
or treasurer takes office, he or she will
be able to tell at a glance that IRS filings
are all up-to-date.
Most important of all, the normal IRS three
year "statute of limitations" is
triggered by the filing of a return. If your
group does not file a 990 or 990EZ, the three
year period never starts, the statute never
closes, and there is no limit on how far back
the IRS can go in an audit situation.
To file a "blank" return, complete
all the identifying information at the top
of the return, check the box indicating that
gross receipts are normally less than $25,000,
sign and date the return, and send it to IRS,
Ogden, Utah 84201. Be sure to make a copy
for your own records.
Employment Taxes
It is never a good idea to ignore a Form 941,
"Employer's Quarterly Federal Tax Return,"
sent to you by the IRS. If you do not need
to file the return, because you had no payroll
for the quarter, or because you have no employees,
complete the return anyway, and send it in
(keeping a copy for your own records.)
It is tempting, when hiring workers for the
first time, to treat them as independent contractors
rather than employees. Withholding, quarterly
deposits, etc. can be such a bother. But misclassification
of employees is, by far, the most common issue
that IRS auditors raise with non-profit organizations.
IRS Publication 539 discusses the factors
the IRS considers in classifying workers.
There are times, of course, when workers really
are independent contractors. Many organizations
overlook the need to report compensation of
$600 or more to the IRS. Awards, fees, and
similar payments must be reported on Form
1099-MISC, which must be sent to the recipient
no later than January 31st, and to the IRS,
with a Form 1096 transmittal, no later than
February 28.
Washington State Requirements
In the state of Washington, non-profit corporations
must file an annual report each year with
Olympia during the corporation's "anniversary
month." If it is not filed, the Secretary
of State will involuntarily dissolve the corporation.
[Contact the Washington Secretary of State
for details (360) 753-7115.] Having your corporate
status lapse means losing your 501(c)(3) status,
since the status is granted to the corporation.
In addition to the annual report described
above, there are several other Washington
state registrations that may need to be filed.
Most organizations that solicit funds from
the general public must complete a charitable
solicitation registration. Most organizations
that maintain any funds for charitable purposes
must register as a "Charitable Trust."
[Phone 1-800-332-GIVE to find out about both
of these.] Some organizations may owe Washington's
Business and Occupations tax. [Ask the Department
of Revenue for details - 1-800-647-7706.]
The IRS is not the only agency that collects
payroll taxes. In the state of Washington,
Employment Security handles state unemployment
taxes, and Labor & Industries handles
state disability insurance.
Public Charity Status
501(c)(3) public charities are supposed to
receive at least one third of their support
from the general public. Some organizations
find themselves relying heavily on donations
from founders or board members, or going back
year after year to the same foundations or
corporations, for income which may not count
as "public" support. It pays to
learn the public support rules and keep an
eye on your one third support test, or to
hire a professional to look this over from
time to time.
Unrelated Business Income
Many organizations keep their members informed
with a regular newsletter, and help defray
the costs of printing and mailing the newsletter
by accepting paid advertising. Unfortunately,
the IRS considers this advertising income
to be unrelated to exempt purposes, and therefore
taxable. Up to $1,000 in unrelated income
can be earned without having to pay tax, but
an organization that receives at least $1,000
in advertising or other unrelated receipts
must file Form 990-T, and pay any tax due.
IRS Publication 598 can give you additional
information about the tax treatment of advertising
and other types of unrelated business taxable
income.
