You’re probably aware that the Form 990 deadline for nonprofits is the 15th day of the 5th month after your year-end (May 15th for calendar-year organizations). But how do you know when your first 990 is due? Many organizations think it depends on when the Form 1023 or Form 1024 (applications to IRS for federal exemption), but it really depends on when your organization was formed. Here are a few examples:
Incorporated November 6, 2014: You need to file a 2014 990 (or 990-N if you qualify) whether or not you had any activity in 2014. The due date is May 15, 2015 for calendar-year organizations. If your year-end is June 30, file a 2014 990 for November 6, 2014 – June 30, 2015; due date is November 15, 2015. The tax return year is based on the year your fiscal year began. If your year-end is November 30, file a 2014 990 for November 6 – November 30, 2014 (due April 15, 2015) and a 2014 990 for December 1 – November 30, 2015 (due April 15, 2016). In this situation, you will have two 2014 tax returns – that’s OK, it’s what the IRS expects.
Unincorporated, but started activity November 6, 2014: These organizations are often groups of people who come together to take on a charitable or socially impactful project. The same filing requirements and deadlines mentioned above apply, but be sure your organization gets an Employer Identification Number (EIN) so that you can file a 990. The organization is, by default, an unincorporated association and needs to file a 990 to report all activity just like an incorporated nonprofit. It’s generally a good idea to incorporate so that the board and management have liability protection, but it’s not required. Many grantors won’t even consider giving money to unincorporated associations, so if these organizations are seeking charitable donations, they typically have a fiscal sponsorship arrangement with another charitable organization.
Fiscally sponsored, incorporated: Fiscal sponsorship agreements will vary depending on the fiscal sponsor organization. Typically, the fiscal sponsor is responsible for reporting on its Form 990 all money they received and spent, including amounts received and spent on behalf of the sponsored organization. If the sponsored organization has revenue or expenses that do not go through the fiscal sponsor, the sponsored organization is generally responsible for reporting the activity on its own Form 990. The fiscal sponsor may be willing to accept a detailed accounting and documentation of the activity from the sponsored organization and report that activity on its 990, but even if that happens, the sponsored organization still needs to file Form 990 since they have a legal entity separate from the fiscal sponsor. That 990 may show $0 activity if everything is reported on the fiscal sponsor’s Form 990. The same deadlines discussed above will apply. If your organization has not applied for charitable status with the IRS, you may need to file as a 501(c)(4) social welfare organization.
Fiscally sponsored, unincorporated: The same guidelines for fiscal sponsorships discussed above apply, but unincorporated groups with a fiscal sponsorship may not need to file a Form 990 if all funds received and spent are routed through the fiscal sponsor. In this situation, the sponsored group has no activity of its own and is essentially a project of the fiscal sponsor for legal and tax purposes. If the group does have financial activity outside of the fiscal sponsor, try to get the fiscal sponsor to report it on its own 990 by providing receipts, invoices, proof of exempt purpose and a detailed accounting record and bank reconciliation of all funds spent. If the fiscal sponsor will not report this activity on its own Form 990, the sponsored organization must file a 990 or report the activity on an individual’s personal Form 1040 tax return. Generally, it’s best to get an EIN and file a Form 990.
