How to Prepare a Tax Return for a Nonprofit

Co-authored by Keila Hill-Trawick, CPA

Last Updated: March 20, 2022 Approved

Even if a nonprofit organization has achieved tax-exempt status, for example under Section 501(c)(3), the organization is likely still required to file a tax return annually. If your nonprofit has employees that are paid, or takes in any income that is unrelated to the exempt activities of the organization, even a tax-exempt organization may still pay taxes on those items.

Steps

1
Determine if you need to file. Certain tax-exempt corporations (nonprofits) are exempt from filing an annual tax return. Generally, an organization that normally has $25,000 or more in gross receipts is required to file a tax return. Smaller organizations that have less than $25,000 in gross receipts are not required to file a tax return.
2
Determine what form to file. The tax return your nonprofit will file largely depends on the amount of money your organization made in the applicable tax year.
- The general form number that a nonprofit will file is form 990, although there are variations of this form. For example, form 990EZ is a short-form return can be used by nonprofits with total receipts of $100,000 and less than $250,000 in assets. A link to the current version of Form 990 is below.
- Smaller organizations that have less than $25,000 in gross receipts may not be required to file a tax return, but instead file e-postcard form 990-N. Detailed information on the appropriate form to file is available on the IRS website, linked below.
Advertisement
3
Fill out the tax return form.^{[1]
X
Expert Source

Keila Hill-Trawick, CPA
Certified Public Accountant
Expert Interview. 30 July 2020.} For some smaller nonprofits, filling out the tax form should be a straightforward process that can be done by someone in a management position of the nonprofit. For larger, more complex organizations, it may be in the organization’s best interest to seek the advice of an accountant familiar with the tax issues of tax-exempt corporations.
- A detailed instruction sheet for completing each line of the form accompanies each form. Be sure to print both the form and the instructions and refer to the instruction sheet for each item to ensure you are providing the requested information. A link to the IRS form is below.
4
File your return on time. You can either e-file or mail your tax return to the IRS.
- The address for mailing returns is:
  
  Department of the Treasury
  Internal Revenue Service Center
  Ogden, UT 84201-0027
- The tax return of a nonprofit tax-exempt corporation is due on the 15th day of the 5th month after the end of the organization's fiscal year. For example, if the fiscal year ends on June 30th, the return would be due by November 15th.
- The IRS provides a form for an extension of the deadline, which is linked below. The form must be filed with the IRS before the tax return filing deadline in order for it to be effective for that year. If your return is due November 15th, you must submit the extension form no later than November 15th.
- Failure to file tax returns can result in severe penalties. If an organization is required to file a return and fails to do so for three consecutive years, the organization will lose its tax-exempt status and be required to reapply.

Community Q&A

Question

Is there any way to turn a profit on a nonprofit organization?

Alex Kwan
Certified Public Accountant
Alex Kwan is a Certified Public Accountant (CPA) and the CEO of Flex Tax and Consulting Group in the San Francisco Bay Area. He has also served as a Vice President for one of the top five Private Equity Firms. With over a decade of experience practicing public accounting, he specializes in client-centered accounting and consulting, R&D tax services, and the small business sector.

Alex Kwan

Certified Public Accountant

Expert Answer

People try to do this all the time, but it's actually really complicated to do this in any kind of way that would be legal and reasonable. I really wouldn't recommend trying to do this. If you're worried about the sustainability of your nonprofit, you'll need to talk to your whoever is handling your funding and your accountant to get a sense for what's going on.
Question

Does my nonprofit need to file a tax return?

Alex Kwan
Certified Public Accountant
Alex Kwan is a Certified Public Accountant (CPA) and the CEO of Flex Tax and Consulting Group in the San Francisco Bay Area. He has also served as a Vice President for one of the top five Private Equity Firms. With over a decade of experience practicing public accounting, he specializes in client-centered accounting and consulting, R&D tax services, and the small business sector.

Alex Kwan

Certified Public Accountant

Expert Answer

Yes, you typically do need to file, but that doesn't mean that you'll necessarily end up paying anything. A lot non-profits don't end up with a bill, but you do normally need to file.
Question

What if the nonprofit corporation is not tax exempt? We only collect annual dues. Are we required to file?

Community Answer

If the dues income is not related to your nonprofit activities as detailed in your original state filing, the income could be taxable as unrelated business income. Of course, the dues income would be offset by any costs incurred to produce that income stream. If it is related to your nonprofit activities, it should not be subject to taxation.