An organization that normally has $50,000 or more in gross receipts and that is required to file an exempt organization information return must file either Form 990, Return of Organization Exempt from Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. See Filing Phase-In for more information about which return to file. The return is due on the 15th day of the 5th month after the end of the organization’s fiscal year. (For example, the 2008 return of an organization whose fiscal year ends on June 30, 2009, would be November 15, 2009.) The due date may be extended for three months, without showing cause, by filing Form 8868 before the due date; an additional three-month extension may be requested on Form 8868 if the organization shows reasonable cause why the return cannot be filed by the extended due date. For taxable years starting after December 31, 2015, there is an automatic six month extension granted upon request.
Small organizations – those whose annual gross receipts are normally less than the threshold- are not required to file an annual return, but may be required to file an annual electronic notice – e-Postcard.
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.
IRS Audits of Non-Profit Organizations
When the IRS audits a non-profit organization, they normally ask to review the following:
1. Governing Instruments
2. Copy of Exemption letter
3. Minutes of meetings (usually several years worth)
4. Financial records, including check register, canceled checks, bank statements, invoices, receipts, and auditors report and working trial balance.
5. 990’s for years before and after year under audit
6. Copies of all other Federal tax and information returns filed, such as 940, 941, W-2, W-3, 1099 and 1096.
7. Pamphlets, brochures, descriptive literature, etc.
8. Newsletters, if the organization publishes one.