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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Reporting Bad Debt, Medicare, & Collection Practices with Schedule H

Hospitals with 501(c)(3) exemption status must report information about activities, policies, and community benefit of its hospital facilities and other non-hospital health care buildings it operated during the tax year. Those who are submitting a 990 form for hospitals can provide this information using a Schedule H.

With a Schedule H, you can also list any bad debt expenses, Medicare, and collection practices. Here are some guidelines to follow when reporting your information.

Part III of Schedule H breaks down into three sections:

Section A - Bad Debt Expenses
In this section, the IRS requires you to

• Report combined bad debt expense
• Provide an estimate of how much bad debt reasonably belongs to patients that likely qualify for financial assistance through the hospital’s policy, if applicable
• Provide logic for what portion of bad debt comes from community benefit

In Line 1, you should indicate whether the hospital reported any bad debt expense listed with Statement No. 15 from the Healthcare Financial Management Association. Even though some hospitals rely on Statement 15 in reporting audited financial statements, the American Institute of Certified Public Accountants (AICPA) doesn't commonly use it, and the IRS doesn’t require organizations to use it for financial assistance costs.

On Line 2, enter the amount of the hospital’s bad debt expense. For patients’ bills partially written as bad debt, you only need to include the proportionate amount. You should also include any share of bad debt expense from any joint ventures the hospital participated in during the tax year. Later, in Part VI, you can describe the method used the determine your bad debt amount.

With Line 3, list the estimated amount of bad debt from Line 2 that comes from patients that qualify for the hospital’s financial assistance policy. You can also use Part VI to explain how you determined the amount or include portions of the bad debt as a community benefit, if applicable.

Line 4 requires you to provide a footnote in Part VI referring to the hospital’s financial statements describing bad debt expense or the page number where this note is located in the attached financial statements. If the financial statements don’t include a footnote discussing bad debt expense, "accounts receivable,” or “allowance for doubtful accounts,” you need to include a statement about how the organization’s statements don’t reflect the information and also explain how the hospital possibly accounts for bad debt.

Section B - Medicare
This section requires you to combine

• Allowable costs to provide services reimbursed by Medicare
• Medicare reimbursements attributable to such costs
• Medicare surplus or shortfall

You should only include allowable costs and reimbursements reported in the hospital’s Medicare Cost Report for the filing year. You won’t need to provide Medicare-related expenses or revenue that you already listed in Part I of the Schedule H.

On Line 5, enter the total income received from Medicare - this includes payments for indirect medical education (IME), Medicare disproportionate share hospital (DSH) revenue, and other amounts paid to the hospital from the Medicare Cost Report. Don’t repeat any costs related to subsidized health services, research, or direct graduate medical education (GME) that you reported in Part I.

In Line 6, list the Medicare allowable costs of care from the amount you have on Line 5. Once again, you’re excluding any subsidized health services, and GMEs that you have in Part I. The Schedule H instructions from the IRS has a worksheet available to calculate your amount. Hospitals with multiple Medicare provider numbers should combine the costs reported in the Medicare Cost Reports for each provider and put the total sum on Line 6.

With Line 7, you just need to subtract Line 6 from Line 5 - a normal amount is a surplus while a negative value is a shortfall. And on Line 8, indicate the available method used to determine the amount on Line 6.

Section C - Collection Practices
The last part only asks you to report the hospital’s written debt collection policy. For Line 9a, indicate whether or not the hospital utilized a debt collection policy for the tax year. Your policy can be either a written billing and collections policy or a written financial assistance policy detailing the hospital’s actions for non-payment situations.

If you answered “Yes” for Line 9a, continue to confirm whether the collection policy contains provisions on collection practices for patients qualifying for financial assistance. If so, describe in Part VI the methods listed for such patients and if those practices also apply to other types of patients.

The IRS requires you to completely fill out 990 forms and any mandatory schedules regarding your exempt organization. If you have any tax-related questions, please consult with a certified professional or contact the IRS Tax-Exempt Hotline at 877.829.5500 for information about your organization.

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Tax-Exempt Hospitals Must Comply with Section 501(r) Regulations

Section 501(r) regulations provide guidelines on how hospitals retain their tax-exempt status. These requirements were implemented to the Internal Revenue Code by the Patient Protection and Affordable Care Act back in 2010. Failing to comply with the following rules will cause hospitals to lose their tax exemption:

• Meeting the Community Health Needs Assessment (CHNA) conditions of Section 501(r)(3)
• Following the Financial Assistance Policy (FAP) necessities of Section 501(r)(4)
• Ensuring that charges for emergency and other medical care for patients with FAP don’t surpass amounts typically billed to patients with insurance
• Preventing any outstanding payment collections before making rational efforts to determine if the patient qualifies for assistance under FAP

Other penalties include a $50,000 excise tax towards hospital organizations failing to meet the Community Health Needs Assessment for the filing year.

Regulations imposed by Section 501(r) went into effect for the taxable year starting after December 31, 2015, and applies to hospital organizations - including government hospital organizations - seeking tax-exempt recognition under Section 501(c)(3). Some government hospitals aren’t responsible for filing IRS Form 990 or submit CHNA information with a 990 form; however, they are still required to make their CHNA and FAP reports publicly available.

Even though failure to comply with Section 501(r) regulations may cause the IRS to revoke tax-exempt status from a hospital, federal officials consider the following facts before revocation:

• The primary reason for failure
• The importance and nature of the failure
• Whether or not the hospital failed requirements in the past
• The number, extent, and significance of facilities that failed if applicable
• Whether the hospital had practices and procedures in place to ensure overall compliance before failing
• Whether the hospital quickly corrected the failure and enforced any safeguards to prevent future failures
• Whether staff regularly followed compliance practices and procedures and the failure happened from some mistake or oversight

Overall, any omissions from a report or errors in operational requirements that are minor, or otherwise accidental due to reasonable causes, are not seen as failing to meet regulations.

An Accountable Care Organization (ACO) is exempt from following Section 501(r) guidelines, but multiple medical facilities are allowed to duplicate the same FAP and other policies as long as it’s the same for each facility. Furthermore, separate hospitals within the same community can perform a joint community health needs assessment and create a joint strategy meeting those goals.

If a health system operates multiple hospitals and one facility fails to meet requirements, that failure will not affect the exemption status of the overall health organization. The IRS may impose a corporate hospital facility tax towards the non-compliant facility for the year it failed compliance. Operations from the failed facility are not seen as unrelated trade or business nor will finances for the non-compliant hospital be affected.

Experts recommend board members of nonprofit hospitals to review regulations from Section 501(r) and carefully examine their healthcare policies to ensure compliance. And remember to file the required 990 form, if applicable, along with the Schedule H.

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Joint Ventures for Tax-Exempt Hospitals

One way health systems can counter against depleting resources and growing demand is by entering into a joint venture with physicians or other businesses.

While this method can boost efficiency and enhance services, it’s important to ensure the joint venture doesn’t endanger your hospital’s tax-exempt status.

A joint venture typically works by creating a new business partnership for tax purposes like a limited liability company (LLC). With a nonprofit hospital partnering with a for-profit company, some issues could discredit your exemption status. Here are a few things experts say you want to avoid.

Private Inurement
A private inurement is using the revenue or assets of an exempt organization to benefit an officer, director, or other key members. Federal laws strictly prohibit tax-exempt groups from private inurement - ensure there are no improper benefits, written or verbal, within the agreement of the venture.

Neglecting Charitable Functions
A tax-exempt organization has to engage in some charitable work - this is fact. If substantial activity from the joint venture isn’t to advance charitable efforts, then the partnership could negatively impact your hospital’s exemption status.

Excessive Unrelated Business Income
Revenue coming from activities that typically has nothing to do with an organization’s exempt purpose is unrelated business income - and gets taxed at the standard rate. Tax-exempt groups are allowed to have revenue from unrelated activities, but if that extra business becomes more significant than the tax-exempt purpose, it can revoke your exemption status.

Private Benefit
A private benefit is using revenue from your joint venture towards a private entity rather than the public. Once again, if the private interest is more substantial than the charitable cause, your hospital can lose its tax-exempt status. You can prevent this outcome by having your nonprofit control the majority of activities conducted by the joint venture.

Ignoring IRC 501(r) Guidelines
With the regulations set under the IRC 501(r), a taxable entity and a nonprofit organization that jointly owns a hospital must conduct specific responsibilities such as performing a community health needs assessment, reducing charges with billing and collection policies, and having a financial assistance policy. Failure to follow the 501(r) rules can result in the hospital’s loss of tax exemption.

Other operation issues relate to a joint venture retaining its exemption, but a sure way to remain compliant with the IRS tax-exempt rules is to file your required 990 form every year. ExpressTaxExempt.com makes it easy to e-file annual, exemption returns and schedules directly to the IRS and supports real-time, automatic email notifications of your filing status.

Our U.S. - based support team is available to assist with your e-filing experience - give us a call at 704.839.2321, Monday through Friday from 9 a.m. to 6 p.m. EST or contact us anytime via email with support@ExpressTaxExempt.com.

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Tax-Exempt Retention for Hospitals

With the most recent changes in tax-exempt requirements and healthcare reform, nonprofit hospitals are facing several challenges with exemption classification and retention. Experts say that nonprofit hospitals receive about $13 billion in tax exemptions annually - that’s a significant amount of money that law officials believe can efficiently fund federal, state, and local programs, if imposed.

However, the opposition argues that enforcing taxes on nonprofit hospitals will not only affect staff, medical programs, and equipment but also lead to higher payments for patients. Even though there is no mandated threshold, state laws typically expect a nonprofit hospital to provide charitable services that value over 1% of gross receipts.

Here are a few other suggestions from tax professionals about maintaining tax-exempt status for a nonprofit hospital:

• Comply with the new tax-exempt requirements established by the Patient Protection/Affordable Care Act (PPACA)
• Express the hospital’s capabilities of accepting Medicaid and Medicare patients and services for low-income patients
• Develop rebuttable cases that show reasonable compensation relationships
• Build and retain documents showcasing charitable benefits and charity care the hospital annually provides for the community
• Prove that any money received for community benefit purposes is used exclusively for that activity such as medical research or health education

State courts have also established reasons that can prevent tax-exempt entitlement for a nonprofit hospital:

• Little or no patients receive free or discounted care
• The value of free care provided is minimal
• Immediately refers unpaid bills to collections
• Charges full rates for uninsured patients
• Fails to provide straightforward benefits to the community it serves

It’s critical for board members to review their hospital’s methods and operations each year and ensure that they’re following the guidelines to classify as tax-exempt. It’s just as important as being compliant with the IRS and filing your annual 990 form with Schedule H.

ExpressTaxExempt’s cloud-based service allows nonprofit organizations and hospitals to file 990 forms, schedules, and extensions quicker and easier than paper filing. Contact our U.S. - based customer support team for any questions or assistance with electronically filing tax-exempt returns. Call us at 704.839.2321, Monday through Friday from 9 a.m. to 6 p.m. EST or send a message to support@ExpressTaxExempt.com.

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Form 990 for Hospitals

Did you know that there are nonprofit hospitals that need to e-file IRS Form 990?

Let’s figure this out together!

What Are Not-For-Profit Hospitals?

A nonprofit hospital, or not-for-profit hospital, is a hospital facility which is set up as a nonprofit organization. Since they are frequently affiliated with a religious denomination, based on a charitable purpose, and are a traditional means of delivering medical care in the United States, they can apply for tax exempt status.

Why Is It Necessary to Complete Schedule H and Form 990?

Hospital organizations use Form 990 and Schedule H to provide information on the activities, benefits, and policies of its hospital facilities and other non-hospital health care facilities that it operated during the tax year.

What Information Does Schedule H Cover?

• • Hospital facilities directly operated by the organization.
• • Hospital facilities operated by disregarded entities of which the organization is the sole member.
• • Other health care facilities and programs of the hospital organization or any of the entities described in 1 or 2, even if provided separately from the hospital's license.
• • Hospital facilities and other health care facilities and programs operated by any joint venture treated as a partnership, to the extent of the hospital organization's proportionate share of the joint venture.

Now that you know, all the hospitals out there can get ready for the upcoming Form 990 deadline!

If you need any help, ask the e-filing professionals of ExpressTaxExempt. They’re available 24/7 by email at Support@ExpressTaxExempt.com.

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