Why Ministries Need to File This Annual Form

Written by Raul Rivera on May 09, 2019 in IRS Compliance

Congratulations! You have made it through April 15. The April 15 deadline for filing personal tax returns seems to always induce stress and often a sense of panic. Getting this critical civic duty out of the way brings so much relief. As much as I would like to tell you that you are done with IRS filings for the year, the truth is that you may not be.

Every year we help more than 1,000 ministry leaders who are starting and leading ministries all across America. One of the many things we do is to provide information about and services to complete the filing requirements that various government departments have for these nonprofits. 

For many ministry leaders, when their Form 990 is due, we often hear, “I completely forgot about filing that form!” 

From my experience in working with ministry leaders across the country, I have found that many of them are surprised to learn about this requirement, and often, they do not learn about it until it is too late!

Neglecting to file Form 990 can lead to costly penalties and the revocation of tax-exempt status.

In this blog, I will discuss everything you and your ministry need to know about Form 990, starting with why this form is absolutely necessary to file.

Why is Form 990 necessary?

Form 990 is required by section 6033 of the tax code. The IRS uses Form 990 to ensure that tax-exempt organizations are remaining compliant with the tax code and nonprofit laws in order to maintain their tax-exempt status.

Although section 6033(a)(3)(A)(i)8 exempts churches from having to file Form 990 on an annual basis, it is still best practice for churches to be aware of this requirement.

This is especially true if your church operates, or plans to operate, a non-church tax-exempt entity such as a community development corporation (CDC) or holdings corporation.

To clarify, although churches are not required to file a Form 990, your church should still be maintaining accurate accounting records. If you have not kept your books and would like to start, or want StartCHURCH to help manage your books, we have a bookkeeping service that can help you with organizing your financial information. Call us at 877-494-4655 to find out more.

The consequences of not filing Form 990

Although your ministry may be exempt from paying taxes, it is not exempt from filing taxes.

The harsh truth is that failing to file Form 990 can be costly! Because of this, it is important to be aware of the consequences of not filing Form 990.

Consequence #1: A very pricey fee to pay

IRC section 6652(c)(1)(A) states,

there shall be paid by the exempt organization $20 for each day during which such failure continues. The maximum penalty under this subparagraph on failures with respect to any 1 return shall not exceed the lesser of $10,000 or 5 percent of the gross receipts of the organization for the year. In the case of an organization having gross receipts exceeding $1,000,000 for any year.... the first sentence of the subparagraph shall be applied by substituting ‘$100’ for ‘$20’.... the maximum penalty under this subparagraph shall not exceed $50,000.

What does this mean?

Essentially, this portion of the tax code is telling us that the IRS will charge a late fee of $20 a day starting from the due date of your ministry’s Form 990.

This penalty can add up quickly as it can total to more than $7,000 in the course of a year.

Consequence #2: Loss of tax-exempt status

Beyond financial penalties, failing to file Form 990 may affect the ministry’s tax-exempt status. After three consecutive years of not filing your ministry’s Form 990, the IRS will revoke its tax-exempt status. 

The loss of your ministry’s tax exemption may not only be costly to you, but it can also affect the tax-deductibility of your donors’ donations.

In order to “right” this “wrong,” your ministry would need to go through a reinstatement process. Should you find your ministry in this position, we offer a Reinstatement Service to help you along the way.

Call us at 877-494-4655 for more information. Or, you can read more about the reinstatement process here.

When is Form 990 due?

Your ministry’s Form 990 due date is based on its fiscal year.

The IRS states that Form 990 “must be filed on the 15th day of the 5th month after the end of your organization’s accounting period.”

Most organizations’ fiscal year runs from January to December. In this instance, your ministry’s Form 990 filing due date would be on May 15. If your fiscal year is something different, for example, from April to March, your due date would then be on August 15. 

Common reasons Form 990 may not get filed

1. Lack of knowledge

The fact of the matter is that most ministry leaders are simply unaware of the requirement to file a Form 990 for their ministry.

This is especially true for pastors of churches that begin a non-non-church organization such as a community development corporation (CDC) or holdings corporation.

These pastors are not used to filing Form 990 since churches are exempt from this requirement. As a result, they do not think about the Form 990 requirement for their non-church nonprofit organization(s).

2. Ministers simply forget

With everything that is involved with the day-to-day operations of running and leading a successful ministry, it is easy to see how this requirement can be forgotten amongst the fray of life and ministry.

Forgetting to file your ministry’s Form 990 can easily be avoided by setting up a calendar reminder for yourself.

You can also utilize our invaluable Form 990 Service so you never forget another filing.

Which Form 990 should I file? 

For 501(c)(3) public charities, other than churches, there are three forms to consider. The form you will file for your ministry depends upon your ministry’s income and assets. The three forms to consider are as follows:

  • Form 990-N: the simplest of the three forms. Organizations with gross receipts of normally $50,000 or less will file this electronic notice. There is no late filing penalty assessment for the e-Postcard/Form 990-N. However, it is important to keep in mind that failure to file the e-Postcard (or any other 990 Form), for three consecutive years will still result in an automatic loss of tax-exempt status.
  • Form 990-EZ: Organizations with gross receipts of normally more than $50,000 but less than $200,000, and whose assets are valued at less than $500,000, are required to file this form.
  • Form 990-Long: Organizations whose gross receipts are on average $200,000 or higher, or whose assets are valued at $500,000 or higher, are required to file Form 990. 

An easy way to never forget your Form 990 filing

One of the things on my heart when I founded StartCHURCH was that I wanted to help ministry leaders excel both spiritually and administratively. 

The administrative tasks of running and operating your ministry’s nonprofit may at times feel overwhelming, but that is why we are here to help! Our trained staff of experts can assist you and your ministry in meeting and maintaining this IRS requirement. If you need help filing your Form 990 this year, I encourage you to call us today at 877-494-4655. 

Let Us Help You File Form 990!

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Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Raul Rivera

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