What IRS Form 990-T (2018) Is For

The IRS Form 990-T (2018) is the Exempt Organization Business Income Tax Return, required for tax-exempt organizations that earn unrelated business taxable income (UBTI) from activities unrelated to the organization’s primary exempt purpose. Even though these entities hold tax-exempt status under section 501(c), they must report and pay tax on profits from unrelated business operations.

Organizations with at least $1,000 in gross income from an unrelated trade or business must file this form. The IRS uses it to determine the unrelated business income tax owed for that tax year. The filing also applies to entities receiving disallowed fringe benefits, such as parking or transportation perks, which must be included in taxable income.

The form helps ensure transparency across private foundations, charities, and 501(c)(3) institutions by identifying and separating taxable activities from their exempt functions. It supports compliance with IRS regulations and confirms that all unrelated business income has been reported. It often complements the organization’s annual information return (Form 990) and clarifies total business income, expenses, and gross receipts for the year.

When You’d Use IRS Form 990-T (2018)

You would use IRS Form 990-T (2018) when your tax-exempt entity must address prior or late filings involving unrelated business income or other reporting corrections.

• Unfiled returns: You should file Form 990-T (2018) when the IRS issues a notice indicating that your organization did not file the required return for that year.
  
  
• Unreported unrelated business income: You must use this form when the organization later discovers income that qualifies as unrelated business taxable income but was not previously reported.
  
  
• Amended filings for corrections: You should submit an amended return when errors are identified in the original filing or figures need to be updated for accuracy.
  
  
• Refund claims: You may file Form 990-T (2018) to request a refund for overpaid unrelated business income tax from prior years, provided the claim falls within the allowed time frame.
  
  
• Discovered UBIT obligations: You are required to file when your organization determines that it has unrelated trade income subject to tax under UBIT rules for the 2018 tax year.

Key Rules or Details for the 2018 Tax Year

The 2018 version of IRS Form 990-T introduced key rules that changed how tax-exempt organizations calculate and report unrelated business taxable income. These adjustments affected how entities determine taxable amounts, track losses, and comply with updated tax rate schedules.

• Siloing rules under Section 512(a)(6): Each unrelated business must calculate its taxable income separately, and losses from one activity cannot offset the income of another.
  
  
• Flat 21% corporate tax rate: All exempt entities became subject to a 21% corporate tax rate of 21%, replacing prior tiered rate structures.
  
  
• Net operating loss limitations: Organizations could no longer carry back losses to prior years, and post-2017 net operating losses must be tracked individually for future use.
  
  
• New Schedule M requirement: A separate Schedule M must be filed for each unrelated business to ensure proper reporting of all income sources.
  
  
• Disallowed fringe benefits inclusion: Parking and transportation benefits disallowed under section 512(a)(7) must be added to unrelated business income calculations.

These changes simplified tax computations but required more precise accounting for unrelated businesses and financial details across each activity.

Step-by-Step (High Level)

Filing IRS Form 990-T (2018) involves several structured steps that help ensure accurate reporting and compliance for tax-exempt entities.

• Obtain transcripts: Request your IRS account transcripts to confirm prior filings, employer identification number details, and payments made during the organization’s fiscal year.
  
  
• Download the correct form: To match the proper tax year, use the official 2018 version of Form 990-T from the IRS website instead of newer editions.
  
  
• Prepare all schedules: Attach Schedules A through K as needed and include a separate Schedule M for each unrelated business activity to reflect income and deductions accurately.
  
  
• File the return: Submit your completed return to the IRS Service Center in Ogden, Utah, or send it through an approved delivery service as listed by the IRS.
  
  
• Retain documentation: Keep copies of all filed forms, financial details, and statements showing total deductions and adjustments for future reference.
  
  
• Make payments electronically: Instead of sending payments with the paper return, pay all taxes owed through the Electronic Federal Tax Payment System (EFTPS).

Completing these steps correctly ensures compliance with IRS requirements and prevents processing delays or correspondence regarding missing supplemental information.

Common Mistakes and How to Avoid Them

Many tax-exempt organizations make errors when completing IRS Form 990-T (2018), which can lead to penalties or processing delays.

• Not applying siloing rules: Always calculate each unrelated business separately to comply with Section 512(a)(6) and prevent disallowed loss offsets.
  
  
• Incorrect NOL tracking: Maintain clear records of pre-2018 and post-2017 net operating losses to ensure accurate carry-forward reporting.
  
  
• Misusing the $1,000 specific deduction: Apply the specific deduction only once per organization rather than per business activity.
  
  
• Omitting disallowed fringe benefits: Include all parking and transportation costs as required by section 512(a)(7) to avoid underreporting unrelated business income.
  
  
• Failing to attach required schedules: When total gross receipts from unrelated businesses exceed $10,000, always attach every necessary schedule, including Schedule M.
  
  
• Using the wrong-year form: Verify that the 2018 version of Form 990-T is used to ensure correct filing for that tax year.

What Happens After You File

Once your IRS Form 990-T (2018) is submitted, the IRS typically processes the return within six to eight weeks. The agency may send notices if discrepancies or missing financial details are found. You can request a payment plan or pay electronically through EFTPS if additional income tax is owed. Interest continues to accrue on unpaid balances until they are resolved. 

Organizations disputing IRS findings may appeal through the IRS Appeals Office, with simplified procedures available for smaller tax-exempt entities or cases under $25,000.

FAQs

How does estimated tax apply to Form 990-T (2018)?

Organizations may need to make estimated tax payments if their business income tax exceeds $500 for the year. These payments help report unrelated business income accurately and avoid underpayment penalties on tax previously deferred or owed from prior periods.

What role does the employer identification number play in filing Form 990-T?

Every filing must include a valid employer identification number to identify the reporting entity. This number ensures that all qualified business income and deductions are correctly linked to the organization’s tax-exempt status and associated records.

Does the alternative minimum tax affect tax-exempt organizations?

Most tax-exempt organizations are not subject to the alternative minimum tax. However, certain trusts or corporations may still be required to compute it if they have specific qualified business income or prior tax previously deferred items.

How does business income tax relate to Form 990-T (2018)?

The business income tax under Form 990-T applies only to income generated from unrelated activities. Organizations must report unrelated business income separately from exempt functions to accurately determine liability and comply with IRS rules.