Tax Alert: Changes to Electronic Filing Requirements for Exempt Organizations
Through the Taxpayer First Act, which was enacted on July 1, 2019, tax exempt organizations will be required to electronically file information returns and related forms. The effects of this legislature are starting to take place and you won’t want to miss an electronic filing requirement as you’ll be subject to a penalty for not filing the return properly.
Here is an update to the requirements for exempt organizations’ electronic filing:
Form 990 and 990-PF
Effective for tax years beginning after July 1, 2019, exempt organizations will be required to file their Form 990 or Form 990-PF electronically. In other words, Form 990 and 990-PF filers with a year end of July 31, 2020 and later MUST be filed electronically. Smaller exempt organizations have been specifically allowed “transitional relief”. For tax years ending before July 31, 2021, the IRS will accept either paper or electronically filed Form 990-EZ. Generally, Form 990-EZ is for organizations with annual gross receipts less than $200,000 and total assets at year-end less than $500,000.
In addition to the Form 990 and Form 990-PF being subject to required electronic filing, other exempt organization forms were included in the mandate such as Form 8872, Political Organization Report of Contributions and Expenditures and Form 1065, US Return of Partnership Income (if filed by a Section 501(d) apostolic organization).
The IRS will no longer accept paper Forms 8872 reporting on periods after 2019. Forms 8872 reporting information for periods starting on or after January 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: IRS, Attn: Request for 8872 Password, Mail Stop 6273, Ogden UT 84201; Fax (855) 214-7520. Organizations can file electronically using the IRS website at IRS.gov/polorgs.
Form 990-T and Form 4720
The IRS will continue to accept paper forms that have not been approved and are not ready to be received in electronic format. These include Form 990-T, Exempt Organization Business Income Tax Return, and Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. The IRS plans to have these returns ready for e-filing in 2021.
For more information on the tax filing changes for exempt organizations, please reach out to your Sax advisor or contact Sax’s Not-for-Profit Practice.
About the Author
Christopher Lazzaro, CPA, MBA is a Senior Tax Manager at Sax and has close to 15 years of experience in public accounting. Chris acts as an extension of his clients’ finance departments, offering analysis of their business transactions, succession and estate planning, tax filing services, compliance reviews, strategic tax planning, and assistance in corresponding with the IRS. He can be reached at [email protected].