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The information in the book is still totally relevant. Unlike with personal income taxes which change from year to year, basic nonprofit tax laws and concepts tend to remain unchanged for long periods of time.

The form 990 due date is not determined with respect to when you apply for tax-exempt status. The IRS generally references the date you applied for an EIN. So, as an example, say an org was incorporated Oct 3, 2023 and applied for and received its EIN on October 20th. Assume further that the organization will use the calendar year as its accounting year. The organization's first 990 filing will be due May 15, 2024 to report on the short initial year which should be Oct 3 to Dec 31. The organization has 27 months from the date of incorporation (the IRS usually makes the calculation based on EIN issue date) to file its application for recognition of tax-exempt status, so the initial return would be marked "application pending." Returns still have to be filed even if status has not yet been applied for. I hope that answers your question.

@@NonprofitTaxHelp Thank you kindly for your response. I have no idea of the organization's incorporation date - it was years ago as far as I know. I assume they are incorporated in some form of charitable organization. I'll share your response and thanks again.

You are correct. If the entity is eligible to submit the 990-N, it does not have to submit anything other than the 990-N. In other words, the 990-N meets the filing requirement by itself.

I hear you. A number of years back (around the time of one of those gov't shutdowns) I noticed the return rate on those green cards dropped to less than 50%. It was that way for quite a few years. Today things have improved a bit, but it can still take a month or more to get the card back. Sometimes I'd get the return receipt back, but not the transmittal letter. Other times it was the opposite. These days I've been faxing communications to the IRS whenever possible. Seems like a lot of mailed communication just goes into the dust bin. I've had dozens of cases where I received the return receipt and the transmittal stamped "received" but the IRS still says there was no record of it being received. That's when I've been glad I went to the trouble. Thanks for watching and sharing your experience. Dealing with the IRS is a chore.

How you handle it depends on when the stock is received and when it is sold. If your receive 10 shares of stock in 2023 valued at $1,000 on the day it was donated to you, and your broker sells it a few hours later for $975, here is how you show it on the 990EZ: The $1,000 non-cash donation of stock goes on line 1 contributions. The sales price of $975 goes on line 5a. The cost basis is the $1,000 value on the date it was received. So there would be a $25 loss on the sale which shows up on line 5c. You will notice that the stock gets counted twice in "gross receipts" (line "L" in the heading section). The IRS considers that you have received a non-cash donation of $1,000 PLUS sales proceeds of $975.

If you received 10 shares of stock in 2022 valued at $1,000 on the date you received it, on the 2022 990-EZ you would have non-cash contribution revenue on line 1 of $1,000, and you would put $1,000 on the balance sheet on line 24 Other Assets. If you sell half those shares in 2023 for $600, you would show $600 in sales proceeds on line line 5a, and $500 cost basis (the value of the shares on the date received) on line 5b, and show a $100 gain on line 5c. Also you would remove $500 worth of the stock from the balance sheet since you sold it.

Well, you could call the IRS to confirm they received your tax return. I doubt they'd respond to a written request. I'm curious to know why you do not file your return electronically? That way you get almost instant confirmation that it was received. This video was recorded many years ago and was primarily directed at nonprofits and other filers who have to mail documents to the IRS. Tax returns are no longer (except in unusual circumstances) documents that need to be mailed to the IRS. Tax returns should be filed electronically if at all possible. The IRS is VERY short-staffed and processing times are long and many mistakes are made and many returns are "lost." Electronic filing is the way to go (unless you have an unusual circumstance that does not accommodate e-filing).

​@@NonprofitTaxHelp I'm a nonresident, and that's why I need to do it this way. I did my taxes with Sprintax and submitted a request to file electronically, but the IRS rejected it. However, I made the payment online. I only plan to send the 1040 NR form. Do you think it's not necessary to send the letter you mentioned in the example or not really?

@@balbae It's not essential to include the transmittal letter and return envelope. You can just mail it Certified or FedEx or whatever. The transmittal return letter is just an extra step that sometimes provides additional proof that the return was received. About half the time the IRS never returns the letter. Be aware that the IRS often specifies a different mailing address for Certified Mail vs a private delivery service like Fedex. Regarding the rejection, the IRS normally provides a rejection code or reason for the rejection. Sometimes it's just a matter of making a small correction in the return header or prior year AGI, then e-filing again.

@@NonprofitTaxHelp okay, thank you so much.

Welcome back!

I seriously doubt the IRS would pay the postage. This method is designed to offer the greatest possible chance of successfully communicating with the IRS. I've never tried using a return envelope without postage.

Great question! There was a memorandum issued in 2022 from the Office of Chief Counsel (IRS) that covered this topic. The answer is that the organization's tax-exempt status is revoked after three consecutive years of filing a Form 990-N when a 990-EZ or 990 should have been filed. This revocation occurs "by operation of law." In other words, it doesn't matter whether the IRS knows or not, the revocation is automatic. However, the IRS wouldn't take any action and would continue to accept 990-N filings until it became aware, which may never happen. This is one of the reasons there is a steady drumbeat in the nonprofit sector to direct more scrutiny to smaller organizations that applied with Form 1023-EZ and file 990-N. But for now, it can be fairly easy to fly under the radar of the IRS. It is a risk though. I have nonprofits contact me regularly because some organization has offered them a large grant, but is asking for their financials and IRS filings. Unfortunately it became obvious that they were filing the wrong returns and were no longer tax-exempt. Big mess to clean up. Still, there are lots of small orgs filing the 990-N when they should be filing a 990-EZ.

@@NonprofitTaxHelp thank you so much for the information! That is very helpful. Unfortunately our municipal shelter is run by a nonprofit but they file the 990N when they have to at least make a couple of hundred thousand dollars a year. I don't want them shut down but I think they need to be run right.

Schedule O is mandatory for the 990-EZ and the 990. It sounds like you are referring to whether to list line 10 grants on Schedule O. If no one received $5K or more and is not required to be listed on Schedule O, find something else to put on schedule O. Usually all returns will show a listing of line 16 other expenses on Schedule O, if nothing else. Your nonprofit is a separate legal entity. It is not like a Schedule C business. If you are charging the nonprofit rent for the use of your home office, it will be an expense for the nonprofit corp and taxable income to you on Form 1040 schedule E. If you are providing the office space at no charge to the nonprofit, since it is not considered your "trade or business," there would be no home office deduction. If you are providing services to the nonprofit and the nonprofit is paying you as an independent contractor, when you report the income on your Form 1040 schedule C, you could take a home office deduction against your self-employment income. You have to be careful with that because an officer of a nonprofit is usually considered an employee, not an independent contractor, and should be receiving a W-2. Most small nonprofits pay officers as independent contractors, but in most cases this is not correct. If your nonprofit is a private foundation rather than a public charity, you should not have any financial transactions with the foundation at all. I'm assuming yours is probably a public charity, but I don't know.

Also, please be aware that the 990-EZ must be filed electronically. The IRS no longer accepts paper returns.

u That's one of the things that makes the 990-EZ much simpler than the full 990--it has no statement of functional expenses. It is not required to provide a breakout between program/admin/FR on the 990-EZ. However, you can add any explanation you like to Schedule O. Total expenses are shown on page 1, line 17 of the 990-EZ. If someone wants to know how much of that was spent directly on programs, they have to go to page 2, Part III, lines 28 through 32. You can add any type of explanation to Schedule O, so feel free to list all the program expense line items on Schedule O if you want to. You could also disclose fundraising expenses on Schedule O, since they are not specifically disclosed on the 990-EZ.

Normally you would mail the letter to the IRS address shown on the penalty notice you received from the IRS. Nonprofit organizations can fax the abatement request to 877-792-2864

There haven't been any new laws or revenue rulings in this area since the book was first published in 2015. Congress and the IRS seem to be satisfied with the status quo. So nothing to update. However, I am considering an expansion of the book to contain additional helpful information on certain topics. That's a work in progress and I'm not sure when it will be ready for prime time. Do you have a particular issue of concern?

In this video, "organization name" refers to the entity that has an issue with the IRS and is mailing documents to the IRS. It could be a nonprofit organization, a corporation, a partnership, or an individual taxpayer. I made the video in the context of a nonprofit organization sending documents to the IRS. I can see that I could have been more clear on that point. The letter could be sent by a CPA on behalf of a client, or it could be sent by a business or nonprofit on behalf of itself. The important part is to identify the person who is sending the letter, and the taxpayer that is the subject of the letter.

Generally it should be a nonprofit corporation if it wants to apply for 501c3 status. But it could also be an unincorporated association, which I don't recommend as it lacks the liability protection of a corporation.

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The green Return Receipt card is usually the first thing to come back. Sometimes it takes a month or two. The transmittal letters often take months to come back. Sometimes they never do. When I recorded this video, the IRS was very good about sending back the letters, but since the last gov't shutdown and then C-O-V-I-D, the IRS has been very slow to process any type of paper document. Just keep waiting.

@NonprofitTaxHelp Okay, will do. Thanks a lot for the reply. 👍🏾

If you are a separate legal entity (nonprofit) the filing requirements are the same. Grants paid to you by the fiscal sponsor are reported as income on your Form 990 according to which 990 you are eligible to file.

There are not a lot of choices at this point. Most people seem to be using www.tax990.com/ Another option is called Aplos, but I think it is more of an accounting system with tax filing capabilities. I haven't used any of them, but I have poked around in the tax990 system and I've reviewed a number of returns prepared using that website. Seems to work OK.

It's OK to hand-write the transmittal. Just make sure it is neat and easy to read. Print the words because I think there are a lot of people who can't read cursive writing these days.

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No, the post office will print the postage and place it on the manila envelope while you are standing there. Then you will pay for the postage and the return receipt charges. Should run about $10, give or take depending on weight. Postal clerk will hand you a stamped copy of the green mailing receipt and a printed receipt from the register.

Yes, I'd probably put it on line 12. Reimbursements to volunteers should be shown on whatever line corresponds to the type of expense that was reimbursed. If you reimbursed a volunteer for mileage driven, I'd call it transportation expense and put it on line 16. An expense reimbursement is not compensation.