The IRS Now Mandates Electronic Filing For All Non-Profits

The IRS Now Mandates Electronic Filing For All Non-Profits

Even though the Internal Revenue Service (IRS) has long accepted electronic tax filings, tax-exempt organizations have been able to rely exclusively on paper returns and filings until recently. The IRS now mandates electronic filing for all non-profits. The new mandate is designed to streamline the filing process, modernize technology, and improve tax compliance in the tax-exempt sector. To help your non-profit organization comply with the new mandate, consider contacting the Jennifer V. Abelaj Law Firm at 212-328-9568 before the next tax deadline.

New Requirements for Non-Profit Electronic Filing

In the years prior to 2019, exempt organizations were only required to electronically file returns if they had at least 245 employees or reported assets of $10 million or more. However, on July 1, 2019, President Donald J. Trump signed the Taxpayer First Act into law, requiring all tax-exempt organizations to e-file their returns.

Smaller exempt organizations were initially provided some relief by being allowed to file paper returns if they filed Form 990-EZ, Short Form Return of Organization Exempt for Income Tax. However, the IRS has stopped accepting paper returns even for this purpose as of July 31, 2021. Due to the new IRS update, all exempt organizations, including those that filed Form 990-EZ, must file their returns electronically.

Forms to Be Electronically Filed

Since the IRS now mandates electronic filing for all non-profits, the following Form 990 series must be electronically filed:

• Form 990, Return of Organization Exempt from Income Tax
• Form 990-EZ, Return of Organization Exempt from Income Tax (Short Form)
• Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation
• Form 990-N, Electronic Notice
• Form 990-T, Exempt Organization Business Income Tax Return

Additionally, tax-exempt organizations that file any of the following forms must now file them electronically:

• Form 8872, Political Organization Report of Contributions and Expenditures
• Form 1120-POL, United States Income Tax Return for Certain Political Organizations
• Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code
• Form 1065, United States Return of Partnership Income

About Form 990

The IRS Form 990 series provides transparency and accountability for the non-profit sector. These forms can generally be viewed and inspected by the public and are the primary source for basic information about the non-profit organization. However, the filing of paper returns often created a lag between the time when the non-profit organization submitted its required forms and when the public had access to view the contents. That made it difficult for the public to have accurate and timely information about many organizations in the non-profit sector. The new mandate is expected to provide more timely data for donors, regulators, and other stakeholders.

The IRS does not require certain non-profit organizations to file Form 990 or even Form 990-EZ. These include:

• Certain religious organizations
• Certain government organizations
• Certain political organizations
• Organizations with gross receipts less than $50,000 (although they must file Form 990-N)
• Certain organizations that file different kinds of annual information returns, such as private charitable entities exempt under section 501(c)(3) and described in section 509(a), private charitable entities terminating their status by becoming a public charity, religious or apostolic organizations described in section 501(d), and stock bonus, pension, or profit-sharing trusts that qualify under section 401.

E-Filing Deadline

The electronic filing deadline for non-profit organizations is July 31. Although smaller exempt organizations were provided with transitional relief to give them more time to switch over from filing paper returns to electronic filing, all tax-exempt organizations except those with a specific exemption must now prepare electronic filings. All entities, including the ones that previously used Form 990-EZ, were required to electronically file forms 990 and 990-EZ with tax years ending July 31, 2021, and later.

How to Comply with the New Mandate

Organizations that previously filed paper tax forms were sent a letter from the IRS notifying them that the IRS now mandates electronic filing for all non-profits. If organizations filed a paper return after the applicable deadline, the IRS might have responded by saying that they needed to redo the return electronically. The IRS might have flagged the return as late when providing this notification. To abide by the new tax law, exempt organizations can engage the services of an outside tax professional or use one of the IRS’s pre-approved software providers to prepare their electronic return.

Because tax-exempt organizations may have complex reporting requirements that are substantially different than for regular taxpayers, they may wish to work with a tax consultant or legal professional who has more experience with the system. The Jennifer V. Abelaj Law Firm works closely with non-profit organizations and is well-versed in the laws and regulations that affect them. Consider contacting the office for help with tax filings and answers to any questions you have.

Contact a Non-Profit Lawyer for Help

If you are uncertain about how to comply with the current requirements for tax filings since the IRS now mandates electronic filings for all non-profits, you might consider reaching out to a lawyer who focuses in this area of the law. The Jennifer V. Abelaj Law Firm has years of experience working with various non-profit organizations, including public charities, private foundations, social welfare organizations, business associations, and more. We also assist with estate planning so that your non-profit organization can benefit from legacy gifts. Numerous charities and non-profit organizations depend on us for help with their creation, governance, transaction assistance, advocacy, tax compliance, and dissolution. We are also prepared to handle any potential legal issues that arise during tax filing season. Because we know all about the new mandate, we can help to ensure compliance and help you achieve your non-profit’s objectives by explaining whether the new mandate applies to your organization, how to transition from paper returns to electronic returns, and how to electronically file a return. Consider contacting the Jennifer V. Abelaj Law Firm at 212-328-9568 to discuss your non-profit organization’s current challenges, tax filing status, and goals.