Maintaining Exempt Status with Unrelated Business Income

When filing either a Form 990 or a Form 990-EZ, you’ll have to report any income that was received outside the normal activities of your organization. Even though your organization may be tax-exempt, income from unrelated business activity can be taxed at corporate income tax rates.  

Before discontinuing any activities that could bring in taxed income, you should understand that tax-exempt organizations are allowed to participate in a regulated amount of business activities that are unrelated to its exempt purposes. Unrelated Business Income becomes taxable if it meets the following qualifications:

Income From a Trade or Business:

A trade or business includes any activity done for the creation of income either from selling goods or from the completion of services. Generally, the IRS sees it as any endeavor motivated by making a profit; therefore, unrelated business income tax can be applied broadly and could cover many activities done through your exempt organization.

Trade or Business is Regularly Carried On:

“Regularly carried on” basically means how often and in what method the business is conducted. Even if your activity is not done year round, it could still be considered as “regularly carried on” if the activity is common to the frequency and method of for-profit organizations.

Example: If a for-profit company normally does an activity seasonally, and your exempt organization does that same or similar seasonal activity, then it would be classified as “regularly carried on.” On the other hand, something like a one-time only sale of property wouldn’t fall in this category.

Trade or Business isn’t Substantially Related:

Of course, for any activity to be considered as unrelated business, it must not be substantially related to the main purpose of your exempt organization. Regulations state that business activities must essentially contribute to the execution of your exempt organization’s purpose. If not, it’s considered unrelated, and any income made can be taxed.

As with any other tax stipulations or rules, there are some exceptions and modifications. Contact your local tax professional if you find yourself in an unspecified situation with unrelated business income.

Word to the Wise:

GIF via GIPHY

Just because your exempt organization can participate in unrelated business activity doesn’t necessarily mean it always should. As mentioned earlier, authorization of unrelated activities should be limited. If operating an unrelated business becomes the primary purpose of your exempt organization, you would risk losing your tax-exempt status.

Report any Unrelated Business Income through your Form 990 or Form 990-EZ with ExpressTaxExempt. We work closely with the IRS to provide you the most secure, easy, and accurate tax e-filing experience. Our servers are encrypted, McAfee secure certified, and protected by SSL (Secure Sockets Layer). Your information goes directly to the IRS and no one else.

For any assistance or questions about e-filing our available 990 forms, you can contact our live professionals by phone (704-839-2321, Monday through Friday from 9 a.m. to 6 p.m., EST), by email (support@expresstaxexempt.com), or by live chat (www.expresstaxexempt.com).

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Upcoming Form 990 & Form 990-EZ Deadline: Is It My Time to File?

If your organization operates on a fiscal tax year and files Form 990 or Form 990-EZ, you may have a tax return deadline coming up soon. Organizations that function fiscally from April 1 to March 31 should e-file their Form 990/990-EZ by the upcoming August 15th due date. Additionally, any organization that filed an extension in February 2017 (fiscal year of October 1 - September 30) must file by August 15th as well.

Not sure what the difference is between Form 990 and 990-EZ or if your organization should file either one? Here’s some information on both forms that might be beneficial to you:

Most organizations exempt from income tax must file an annual information return, which is commonly known as a Form 990 or Form 990-EZ. Form 990 is typically filed by organizations with gross receipts that are more than or equal to $200,000 in gross receipts or total assets more than or equal to $500,000. Form 990-EZ is for very similar but for organizations that have less than $200,000 in gross receipts and $500,000 in total assets.

NOTE: Gross receipts are the total amounts the organization received from all sources during its annual accounting period.

Groups and organizations that usually file Form 990 or 990-EZ include: hospitals, schools, churches, charities, sports clubs, parent teachers associations, public libraries and facilities, cultural organizations and associations, employee associations, Veterans of Foreign Wars, and more.

Organizations that fail to file either form by its due date will incur a penalty against the organization. A penalty of $20 a day, not to exceed the lesser of $10,000 or 5% of the gross receipts of the organization for the year can be charged unless it can be shown the organization filed late due to a reasonable cause. Organizations with annual gross receipts exceeding $1,000,000 are subject to a penalty of $100 for each day with a maximum of $51,000 for any one return.

Organizations worldwide can easily stay in compliance and good standing with the IRS by filing online annually with ExpressTaxExempt. As the #1 authorized IRS e-file provider, we provide all users with our recently reduced filing rates, 100% US-based customer support service, and simplistic e-filing process which allow each organization to e-file IRS Form 990 & 990-EZ securely with the IRS.

We encourage you to contact us via phone at 704.839.2321 on Monday through Friday from 9 a.m. to 6 p.m. EST or reach out to us 24/7 via email at support@ExpressTaxExempt.com if you have any questions about the e-filing process.

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Reduced Filing Prices Now Available with ExpressTaxExempt

Christmas really does come in July! ExpressTaxExempt is excited to announce that it is now offering new, reduced rates for nonprofit and exempt organizations to easily prepare and e-file their annual tax forms. A premiere product of SPAN Enterprises, ExpressTaxExempt serves as the #1 tax e-filing solution for tax exempt organizations worldwide. 

Users, both current and new, can now e-file for some of the best prices on the market and have access to stellar customer service that is only available through ExpressTaxExempt. 

Pricing

New pricing for Form 990 Series & Form 1120-POL is as follows:

• *Form 990-N (e-Postcard) ~ $9.90
• *Form 990-EZ (Short Form) ~ $59.90 [previously $129.95]
• *Form 990 (Long Form) ~ $69.90 [previously $299.95]
• *Form 990-PF (Private Foundation) ~ $99.90 [previously $499.95]
• *Form 1120-POL (Political Organization) ~ $49.90 [new form] 
• *Form 8868 (Extension) ~ $14.90 [previously $14.95] 

Almost unbelievable right?! Well it gets even better than that. ExpressTaxExempt new e-filing prices are also paired with exclusive features for each user. Users will have the ability to file and transmit with the #1 IRS-authorized e-filing solution, complete the filing process in an interview-style format, file for previous tax years (2015 and 2014), receive immediate email notifications regarding the acceptance or rejection of their return, free information return amendments, assistance from our U.S. based support team via phone, live chat, and email, along with many other great features. 

One may ask, “Why should I file with ExpressTaxExempt instead of another provider?” At ExpressTaxExempt, we provide security, ease, and peace of mind to exempt organizations and its leaders. We respect the services that nonprofit and exempt organizations provide to communities and are motivated to help with e-filing so you can get back to proudly making a difference in your community. With newly reduced pricing, organizations can now save funds annually when e-filing to maintain its tax exempt status. Pay us a visit at www.expresstaxexempt.com today and begin your e-filing process. 

If you have any questions about the e-filing process or need assistance while filing, feel free to contact us via phone at 704.839.2321 on Monday through Friday from 9 a.m. to 6 p.m. EST or reach out to us 24/7 via email at support@ExpressTaxExempt.com. 

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Anytime Filing is Right Here with ExpressTaxExempt!

Form 990 is long, huh? And while Form 990-EZ is shorter, it’s not that much of a breeze either. And don’t even get us started on Form 990-PF. Plus the schedules! Basically, if you aren’t e-filing Form 990-N (the e-Postcard), you’re going to be putting in quite a bit of time completing the yearly IRS information return for your tax-exempt organization.

Of course, if you find you’re running out of time, there’s always Form 8868, the tax-exempt extension form which will get you 6 extra months to e-file your 990 Form. But why not start a little earlier than you normally would, do a little of your form at a time, then send it off knowing that it’s accurate and error-free? With ExpressTaxExempt, you can!

Cloud-Based E-filing
ExpressTaxExempt is a unique option for e-filing your 990 Form because it’s an entirely cloud-based program. Everything you do in your account is saved for the next time you log in. We know you’re busy, so if you need to go in, do a little 990-ing, then go do something else, you can!

Do a Little or Do a Lot!
We’ve streamlined the process of completing Form 990! That means you go straight through your form rather than jumping between parts and schedules to complete your return. This makes it even easier to do a little of your return - or a lot of it! - at a time. Once you complete a section and click “Continue,” that section is automatically saved in your account so if you need to log off for a bit, you can pick right back up where you left when you come back.

File Anytime, Anywhere…
We say “Anytime Filing” because we mean ANYTIME filing. And that cloud-based e-filing part means you can file anywhere too, so long as you have an internet connection. You can e-file at your computer or with a tablet using the ExpressTaxExempt mobile site, optimized for tablet use.

…And We’ll Be Here to Help!
Not only do we have error checks built into our program, but our US-based customer support is available anytime you need it too! If you have any questions while you’re working through your 990 Form, we’re available by phone, live chat, and email and are happy to help in any way we can!

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Choppin’ Up with the Schedules Part 2

Welcome Back!
Last time, we were chopping down the first four schedules that you may need to complete when filing a Form 990-EZ. That blog can be found HERE. So, not to stall any longer, let’s continue cutting through the second half.

Form 990-EZ Schedules (cont.)

Schedule G
You want to play a little game? How about raising funds? This schedule is for reporting how your tax-exempt organization uses professional fundraising services, or information about your organization’s fundraising and gaming events.

Schedule L
Brace yourself… Schedule L is probably the most elaborate form within the Form 990-EZ. But it can be chopped down and handled like anything else. Basically, Schedule L asks for two main things:

First, information on certain financial transactions or arrangements between your organization and

• Disqualified person(s) under section 4958
• Other interested persons

Second, knowledge on whether a member of your organization's governing body is an independent member for purposes of Form 990, Part VI, line 1b.

Hint: You will need to complete this schedule if you answered “Yes” to Form 990-EZ, Part V, line 40b, regarding excess benefit transactions, or Form 990-EZ, Part V, line 38a, regarding loans.

Other things to consider when filling out a Schedule L include

• Excess Benefit Transactions
• Assistance Benefitting Interested Persons
• Types of Reportable Transactions

This all may be daunting to you at first; however, with a calm demeanor a decent understanding, you can get through “L” like any other schedule.

Schedule N
The point of No return, if this schedule applies to your tax-exempt organization. The purpose of filling this form is to report your organization going out of business or disposing more than 25% of your net assets through a contraction, sale, exchange, or other disposition.

Schedule O
Oh, oh, we’re about done, you know? In a nutshell, this form is for detailed responses to specific questions or explanations of your operations that couldn’t be narrated through the other parts of the Form 990-EZ.

Hint: You will need to complete a Schedule O to provide any detailed information for the following sections:

• Part I, Lines 8,10,16, 20
• Part II, Lines 24, 26
• Part III, Line 31
• Part V, Lines 33, 34, 35b

Not too bad, right? Keep in mind that not all tax-exempt organizations operate the same. So you might have to fill out more schedules than the next organization. No worries though. And even though you may like to get through it as quickly as possible, your main point should be successfully filing, not filing the fastest.

Get your Form 990-EZ completed error-free by e-filing with Express990. Our service provides a built-in error check that makes sure your form is free of mistakes before transmitting to the IRS - no matter how quickly you get through the process.

For assistance with e-filing any of our available 990 forms, contact our live support by phone Monday through Friday from 9am to 6pm, Eastern Standard Time, at (704) 839-2321, by email at support@expresstaxexempt.com, or by live chat at www.expresstaxexempt.com.

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Choppin’ Up with the Schedules Part 1

They call the Form 990-EZ the “short form.” But looking at it, you might be thinking, “What’s so short about it? There are schedules and everything like the long form.” While you may have a point, let’s just think about it. A Form 990-EZ is for tax-exempt organizations with gross receipts less than $200,000 and total assets less than $500,000; you know this already.

With that cap limit in place, your organization probably isn’t participating in every activity each schedule is asking about versus a tax-exempt organization that needs to file a 990 Long (Form 990). And, once you understand simply what each schedule is asking for, you’ll soon figure out which ones apply to your organization. With that knowledge, you’ll be able to chop down the Form 990-EZ like a lumberjack with sticks of butter on his feet, skating in Paul Bunyan’s giant skillet to cook flapjacks… No, it doesn’t make sense, but we’re about taxes here, not whimsical forest fantasies.

Form 990-EZ Schedules

Schedule A
No matter what, any tax-exempt organization recognized under 501(c)(3) will have to complete a Schedule A because it explains what type of organization you have. Your organization may be classified as:

• Government
• Education
• Community Organization
• Grassroots

The schedule also asks about your public support like where it comes from and in what form it comes in such as grants, gifts, etc.

Schedule B
This form wants to know about your contributors. Generally, if your organization receives a single contribution that’s worth over $5,000, it will be reported here. Any contribution from an exclusively religious contributor that’s over $1,000 is reported on this form as well.

The IRS lists a “Special Rule” that could determine how you file this particular form:

For an organization described in section 501(c)(3) organizations that meets the 33 and 1/3% support test of the regulations under sections 509(a)(1) and 170(b)(1)(A)(vi) and not just the 10% support test (whether or not the organization is otherwise described in section 170(b)(1)(A)), list in Part I only those contributors whose contribution of $5,000 or more during the tax year is greater than 2% of the amount reported on Form 990-EZ, Line 1.

For more details on the “Special Rule” visit the Schedule B (Form 990, 990-EZ, or 990-PF), Schedule of Contributors page of the IRS.

Schedule C
If your organization is politically active, then you’ll need to complete a Schedule C. On this form, you will need to provide information about your organization’s political and lobbying activities. According to the IRS, lobbying activities are considered as…

An attempt to influence legislation by propaganda or otherwise, presentation of testimony at public hearings held by legislative committees, correspondence and conferences with legislators and their staffs, communications by electronic means, and publication of documents advocating specific legislative action.

Schedule E
Ok, here’s a hint. If your organization operates as a school, you’ll need to fill out this form. It inquires about your school’s policies, facilities, and benefits in detail.

Another Hint: Answering “Yes” in Part VI, line 48 of Form 990-EZ pretty much guarantees a Schedule E being completed.

At this point, you’ve already chopped the Form 990-EZ in half. And you know what they say, “Rome wasn’t built in a day.” Nothing wrong with you taking a well-deserved break. Next time, we’ll chop through the second half of schedules for the Form 990-EZ.

Cut even more time during your tax season by e-filing with Express990. We support all the schedules needed for the Form 990-EZ, and we offer a safe, secure, and accurate e-filing process, backed by expert professionals that will save you time and money.

For assistance with e-filing any of our available 990 forms, contact our live support by phone Monday through Friday from 9am to 6pm, Eastern Standard Time, at (704) 839-2321, by email at support@expresstaxexempt.com, or by live chat at www.expresstaxexempt.com.

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Tax Tips To Avoid Late Filing Penalties For Form 990-EZ

Unfortunately, just like the 990-N, there’s no sure-fire way avoid IRS penalties for late filing the 990-EZ, except filing on time. In order to understand the gravity of this situation, let’s look at what the penalties could be if you fail to file:

“If an organization whose gross receipts are less than $1,000,000 for its tax year files its Form 990 after the due date (including any extensions), and the organization doesn't provide reasonable cause for filing late, the Internal Revenue Service will impose a penalty of $20 per day for each day the return is late. The maximum penalty is $10,000, or 5 percent of the organization's gross receipts, whichever is less. The penalty increases to $100 per day, up to a maximum of $50,000, for an organization whose gross receipts exceed $1,000,000.

• “An organization that fails to file the required information return (Form 990, Form 990-EZ, or Form 990-PF) or e-Postcard (Form 990-N) for three consecutive tax years will automatically lose its tax-exempt status.”

That’s a hefty payment for a tax-exempt organization and losing your exempt status is no joke. You can make filing your 990-EZ less...dare we say it...taxing by having all of your information ready before you begin filing. Nothing ratchets up the stress meter like a fast-approaching deadline and not being able to find the address of a big contributor.

We also recommend making this a group effort: have those in your organization that know it best to divide the work between the, based on who is better at what. Assign fundraising events to whoever puts together your events. Give the donor list section to the person who knows your biggest donors best. Let the public relations officer handle the explanation of the organization’s exempt purpose. Long story short, “teamwork makes the dream work.”

You can avoid pesky and potentially organization-ending IRS penalties by filing in a timely manner, filing a Form 8868, Extension of Time to File, or adding an explanation as to why you’re filing late. The IRS will assess penalties on a case-by-case basis given an adequate explanation can be produced. In any case, being proactive can reduce your stress and keep you out of hot water, so file with Express990.com and stop letting those taxes get to you.

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