New Electronic Filing Mandates for Exempt Organizations
As the digital world continues to become all encompassing, exempt organizations need to be aware of the shift from paper filing to electronic. Here is a quick update on the mandates the IRS recently released with regards to e-filing Forms 1023, 1023-EZ, 990/990PF, 990-EZ and 8872:
The IRS recently announced, effective Jan. 31, 2020, that applications for tax-exempt status under Sec. 501(c)(3) must only be submitted electronically (Rev. Proc. 2020-8). Taxpayers will no longer be able to file Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, on paper, but instead must complete and submit the form through Pay.gov. However, under a transition rule, the IRS will accept processing a completed paper Form 1023 accompanied by the correct user fee, if the submission of the paper form is postmarked on or before 90 days after Jan. 31.
To submit Form 1023 electronically, a taxpayer will need to:
- Register for an account on Pay.gov;
- Enter “1023” in the search box and select Form 1023; and
- Complete the form.
An electronic submission requirement has been applied to Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, since 2014. The Form 1023-EZ streamlined application process is available for U.S. organizations with assets of $250,000 or less and annual gross receipts of $50,000 or less.
The submission process is the same as form 1023.
The Internal Revenue Service announced that the Taxpayer First Act, enacted July 1, 2019 requires tax exempt organizations to electronically file information returns and related forms. The new law affects tax exempt organizations in tax years beginning after July 1, 2019.
The following IRS forms are included in the mandate:
- Form 990, Return of Organization Exempt from Income Tax
- Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation
Those who previously filed paper forms will receive a letter from the IRS informing them of the change. Filing deadlines vary by form type. Although Forms 990-T and 4720 will come under the e-filing requirement in 2020, the IRS will continue to accept these forms on paper pending conversion to electronic format.
For small exempt organizations, new legislation specifically allows a postponement (“transitional relief”). For tax years ending before July 31, 2021, the IRS will accept either paper or electronic filing of Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. For tax years ending July 31, 2021, and later, Forms 990-EZ must be filed electronically. Generally, Form 990-EZ is for organizations with annual gross receipts less than $200,000 and total assets at tax year-end less than $500,000.
The IRS will no longer accept paper Forms 8872 reporting on periods after 2019. Forms 8872 reporting information for periods starting on or after Jan. 2020 will be due electronically by Section 527 organizations. These include political parties, political action committees and campaign committees of candidates for federal, state or local office.
Among other requirements, most tax-exempt political organizations have a requirement to file semiannual, quarterly or monthly reports on Form 8872. To file electronically, the organization must have the username and password it received from the IRS after electronically filing its initial notice (Form 8871). To replace a username or password, please contact the IRS in one of two ways:
- Mail: IRS, Attn: Request for 8872 Password
Mail Stop 6273, Ogden UT 84201
- Fax: Fax (855) 214-7520
Organizations can file electronically using the IRS website at IRS.gov/polorgs.
Sax’s Not-for-Profit Practice will continue to update you on relevant updates to not-for-profit organizations as they emerge. If you have any questions, please reach out to a Sax advisor at (973) 472-6250 or contact Marqus White, Tax Partner within Sax’s Not-for-Profit Practice.