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  1. What are the most common errors and omissions on Form 990?
  2. What are the steps for obtaining tax-exempt status from the IRS?
  3. Who must file Form 990?
  4. What forms are required for the Small Business Health Care Tax Credit?
  5. What to do if your tax-exempt status has been revoked
  6. How do I reach the IRS with questions about my organization?

1. What are the most common errors and omissions on Form 990?

In May 2004, Reed Drew, Charitable Audit Coordinator with the DOJ’s Charitable Activities Section, forwarded a list of the five most common 990 errors to Public Accountants throughout Oregon.

You may read the entire 990 Errors and Omissions document here.

NOTE: The modified IRS Form 990 went into effect in 2009. While information in this document is still relevant, please check with a licensed accountant about how to properly fill out and file a Form 990.

Click here to read some of the IRS’s tips for completing and filing Form 990.

2. What are the steps for obtaining tax-exempt status from the IRS?

Below are some suggested steps for obtaining federal tax-exempt status with the IRS. You must petition for tax-exempt status once you have already filed for incorporation with the Oregon Secretary of State and obtained your Employer Identification Number (EIN). For more information about obtaining incorporation and an EIN, please refer to the FAQ Section on Starting a Nonprofit Organization.

a. To apply for tax exemption under Section 501(c)(3) of the internal revenue code, you need to file Form 1023 with the IRS.

b. You can order a Form 1023 Packet from the IRS by calling 800-829-3676, although the IRS prefers online filings. If you order Form 1023 over the phone, you should also order Form 8718, and Publication 557.

c. There is a non-refundable filing fee to apply for tax exemption. According to the IRS, the amount of the user fee depends on the applying organization's average annual gross receipts. If the organization's average annual gross receipts have exceeded or will exceed $10,000 annually over a four-year period, the filing fee is $850. If gross receipts have not exceeded or will not exceed $10,000 annually over a four-year period, the filing fee is $400. An applicant must certify its gross receipts in Part XI of Form 1023.

d. Form 1023 is not necessary for organizations that have gross receipts in each taxable year of normally not more than $5,000. Organizations in this category should still register with the IRS by calling 877-829-5500. They must also file Form 990-N (e-postcard) annually.

If you apply for tax-exempt status within 27 months of incorporation, your tax-exempt status will be retroactive to the date of incorporation.

The filing address for 1023 applications from Oregon is:
Internal Revenue Service
PO Box 12192
Covington, KY 41012-0192

NOTE: If you receive any correspondence from the IRS regarding your application, be sure to respond within the time limit indicated, even if it is only to ask for additional time. If you fail to respond, your application file may be closed and you will have to re-apply and pay an additional filing fee.

3. Who must file Form 990?

Tax-exempt organizations, nonexempt charitable trusts, and section 527 political organizations whose gross receipts normally exceed $25,000 must provide the IRS with the information required by the tax code. These organizations must file Form 990 or Form 990-EZ.

To find out more about who must file which form, read the Form 990 instructions bulletin published by the IRS.

Small tax-exempt organizations whose gross receipts are normally $25,000 or less must file Form 990-N (e-Postcard).

For more information about the Form 990-N (e-Postcard), please visit the IRS’s website.

4. What forms are required for the Small Business Health Care Tax Credit?

The Internal Revenue Service has released final guidance for small employers eligible to claim the new small business health care tax credit for the 2010 tax year. Tax-exempt organizations will use Form 8941, Credit for Small Employer Health Insurance Premiums, and its instructions, to figure their refundable credit for the 2010 tax year. Nonprofits will then claim the credit on Line 44F of Form 990-T, now available in draft form on IRS.gov. Though primarily filed by organizations liable for the tax on unrelated business income, Form 990-T will also be used by any eligible 501(c) tax-exempt organizations to claim the credit, regardless of whether they are subject to this tax.

For additional information on the Small Business Health Tax Credit, as well as frequently asked questions and other resources, go to IRS.gov.

5. What to do if your tax-exempt status has been revoked

On June 8, 2011, the IRS released a list of 3,733 Oregon nonprofits that had their tax-exempt status automatically revoked due to failure to file annual returns (Forms 990). If your nonprofit is on this list, your tax-exemption status has been revoked. To find out if your organization is on the list, visit the IRS website for a list of excel spreadsheets by state, or search the Chronicle of Philanthropy database.
The National Council of Nonprofits has developed a special webpage and tip sheet on options available to organizations. Nonprofits that re-apply may request in a letter to the IRS that the reinstatement of their tax-exempt status be retroactive to the date of their original tax-exempt recognition, but the IRS will grant that request only if it determines that there was “reasonable cause” for the nonprofit to have missed the filing deadlines. Make sure to carefully follow the instructions on the IRS website for requesting “retroactive reinstatement” of your organization’s tax-exempt status.

View or download the Fact Sheet

6. How do I reach the IRS with questions about my organization?

The IRS’s Exempt Organizations, Retirement Plan Administrators, and Government Entities Hotline can be reached toll free at 1-877-829-5500.

Its hours of operation are Monday through Friday, 7:00 a.m. to 7:00 p.m. Central Time.