Nonprofit Accounting Basics

Taxpayer First Act Mandates E-Filing for All 990 Series Returns

Note: Articles published before January 1, 2017 may be out of date. We are in the process of updating this content.

Aug 29, 2019

On July 1, 2019, the President signed H.R. 3151, the Taxpayer First Act (the Act). The Act, while revenue-neutral, contains many provisions which improve services to taxpayers and change certain IRS administrative procedures.

A couple of provisions in the Act directly affect tax-exempt organizations:

Mandatory E-filing by All Exempt Organizations:    Per the Act, all exempt organizations will now be required to electronically file Form 990 series returns, including Forms 990-T and 990-PF. 

Previously, only the largest and the smallest organizations were required to file their annual information returns electronically. Exempt organizations with assets of $10 million or more and that file at least 250 returns during a calendar year were required to e-file their Form 990 information returns. Private foundations and charitable trusts, regardless of asset size, that file at least 250 returns during a calendar year were also required to e-file their Form 990-PF information returns. Organizations that file Form 990-N (i.e., the e-postcard) also were required to e-file.

The Act extends the requirement to file electronically to all tax-exempt organizations required to file statements or returns in the Form 990 series or Form 8872 (“Political Organization Report of Contributions and Expenditures” for certain Section 527 political organizations). Although Forms 990 and 8872 have been available for e-filing for many years, until now, Form 990-T has not been available for e-filing. 

The provision also requires that the IRS make the information provided on the forms available to the public as soon as practicable in a machine readable format.

This provision is effective for tax years beginning after July 1, 2019.   However, the Act contains a provision that the Secretary of Treasury may provide transitional relief for small organizations and for Form 990-T filers for up to 2 years.  Small organizations are defined as those having gross receipts less than $200,000 and total gross assets less than $500,000 (i.e., the same threshold currently required for 990-EZ filing).  

Notice Required Before Automatic Revocation of Exempt Status:  Under previous legislation, organizations that do not file a 990 series return (including Form 990-N) for three consecutive years will automatically have their exempt status revoked.  Previously, organizations only found about this revocation once it had already occurred and would then have to re-apply for exemption.   Under the Act, the IRS will now be required to send a notice after the second year of non-filing, thus giving non-compliant organizations a chance to file before loss of exempt status. 

The notice will be required if the return for the second year of non-filing was required to be filed after December 31, 2019.

Other Provisions of the Act:  Among the many provisions of the Act are included several relating to identify theft and cybersecurity, issues of great importance to all.  The IRS is also required to make e-filed return data machine readable so that computers can process it—greatly adding to transparency. Lastly, there is an increase in the minimum amount of income tax owed which will trigger the failure to file penalty:  the minimum is increased from $205 to $330 for calendar years beginning after 2019.