Form 990-EZ Tax Year 2021 Compliance Checklist
Understanding 2021 Form 990-EZ Requirements
The 2021 Form 990-EZ marks the year of the mandatory electronic filing transition for tax years ending on or after July 31, 2021. Organizations must have gross receipts less than $200,000 and total assets less than $500,000 at year-end to qualify. Both conditions must be met simultaneously. Organizations exceeding either threshold are required to file Form 990.
Certain entity types are permanently prohibited from using Form 990-EZ: donor-advised fund sponsors, hospital operators, section 501(c)(29) nonprofit health insurance issuers, and section 512(b)(13) controlling organizations.
Year-Specific Applicability
The American Rescue Plan Act of 2021 expanded Paycheck Protection Program eligibility for certain Section 501(c) entities, with forgiveness income reported through standard revenue lines. Economic Impact Payment receipts received in 2021 are reported through applicable revenue lines. Electronic filing became mandatory for tax years ending on or after July 31, 2021, and there is no paper filing option available, except for name changes.
Filing Eligibility Requirements
Organizations must have gross receipts less than $200,000 and total assets less than $500,000. Private foundations must file Form 990-PF exclusively. Donor-advised fund sponsors must file Form 990. Hospital operators must file Form 990 and Schedule H. Section 501(c)(3) organizations must file Form 990. Section 512(b)(13) requires controlling organizations that transfer funds to file Form 990. Parts I through V apply to all filers. Part VI applies only to section 501(c)(3) organizations and section 4947(a)(1) trusts. All section 501(c)(3) organizations must complete Schedule A.
10-Step Compliance Checklist
1. Verify Filing Eligibility
Confirm 2021 gross receipts are less than $200,000 and year-end total assets are less than $500,000. Both conditions must be satisfied. If either threshold is met or exceeded, file Form 990 instead. Organizations with unrelated business gross income of $1,000 or more must also file Form 990-T. Calculate gross receipts by adding line 5b, line 6c, and line 7b to line 9. Ensure the organization is not required to file Form 990 due to entity type restrictions.
2. Confirm Organization Type Eligibility
Verify the organization is not a private foundation, donor-advised fund sponsor, hospital operator, section 501(c)(29) organization, or section 512(b)(13) controlling organization that transferred funds. Private foundations, including section 4947(a)(1) trusts treated as private foundations, must file Form 990-PF. Organizations operating hospitals are required to file Form 990, as well as Schedule H. Additionally, organizations maintaining donor-advised funds must also file Form 990.
3. Gather Required Documents
Collect Forms W-2 for all officers and employees. Gather Forms 1099-NEC reporting nonemployee compensation in box 1 for independent contractors. Collect Forms 1099-MISC if used for other payments. Gather Forms 1099-INT documenting investment income. Compile donation receipts. Obtain grant agreements. Collect program service revenue records. Gather fundraising event records and gaming activity documentation if applicable.
4. Report Revenue
Enter contributions, gifts, and grants on line 1. Report program service revenue on line 2. Report membership dues on line 3. Report investment income on line 4. Calculate net gain or loss from asset sales on lines 5a through 5c. Report gaming and fundraising events on lines 6a through 6d. If gross gaming income exceeds $15,000, attach Schedule G. If the sum of gross fundraising event income and contributions exceeds $15,000, attach Schedule G. Report inventory sales on lines 7a through 7c. Report other revenue on line 8. Calculate total revenue on line 9 by adding lines 1, 2, 3, 4, 5c, 6d, 7c, and 8.
5. Report Expenses
Enter grants paid on line 10 with details in Schedule O. Report member benefits on line 11. Report salaries, compensation, and employee benefits on line 12. Include Form W-2 box one or box 5, whichever is greater, for employees. Include Form 1099-NEC box 1 for nonemployee compensation. Report professional fees on line 13. Report occupancy costs on line 14. Report printing, postage, and shipping on line 15. Report other expenses on line 16 with descriptions in Schedule O. Calculate total expenses on line 17 by adding lines 10 through 16.
6. Calculate Net Assets
Compute excess or deficit on line 18 by subtracting line 17 from line 9. Enter beginning net assets from the prior year, line 27 column A, on line 19. Report other changes in net assets on line 20 with explanations in Schedule O. Calculate ending net assets on line 21 by combining lines 18, 19, and 20.
7. Complete Balance Sheet
Part II requires columns A and B, with column A for the beginning of the year and column B for the end of the year. Report cash, savings, and investments on line 22. Report land and buildings on line 23. Report other assets on line 24 with Schedule O descriptions when significant. Calculate total assets on line 25 by summing lines 22, 23, and 24. If line 25 column B equals or exceeds $500,000, file Form 990 instead. Report total liabilities on line 26 with Schedule O descriptions. Calculate net assets on line 27 by subtracting line 26 from line 25. Line 27 column B must agree with line 21.
8. Describe Program Accomplishments
Describe the organization’s primary exempt purpose in Part III. For the three most expensive program services, provide descriptions of the services, the number of persons benefited, and relevant information. Report expenses for each program. Indicate the grants included and check the box if they are foreign grants. If there are more than three programs, describe additional ones on line 31 in Schedule O. Calculate total program service expenses on line 32.
9. List Officers, Directors, Employees, and Contractors
Complete Part IV, listing all officers, directors, trustees, and key employees, even if they are unpaid. For each, provide name, title, average weekly hours, reportable compensation from Forms W-2, 1099-MISC, or 1099-NEC, entering zero if unpaid, health benefits, deferred compensation, and estimated other compensation. Form 1099-NEC, Box 1, reports nonemployee compensation, effective tax year 2020. Section 501(c)(3) organizations complete line 50 of the table listing the five highest-compensated employees who earn over $100,000. Complete the line 51 table listing the five highest-compensated independent contractors earning over $100,000. Enter none if no employees or contractors meet thresholds.
10. Answer Compliance Questions and Attach Schedules
Answer all Part V questions, lines 33 through 46 regarding significant activities, organizational changes, unrelated business income, section 6033(e) requirements, liquidation, political expenditures, loans to officers, club information, excess benefit transactions, prohibited tax shelters, states where filed, foreign accounts, foreign offices, section 4947(a)(1) status, donor-advised funds, hospital operations, indoor tanning, controlled entities, and political activities.
If unrelated business gross income of $1,000 or more on line 35a, file Form 990-T. If excess benefit transactions are on line 40b, attach Schedule L Part I. If donor-advised funds are on line 44a or hospitals are on line 44b, they must file Form 990 instead. If the controlled entity is on line 45, determine if Form 990 and Schedule R are required.
Section 501(c)(3) organizations answer Part VI questions 47–49b. Answer whether engaged in lobbying or had a section 501(h) election. Determine whether the organization is a school and complete Schedule E if so. Answer whether you made transfers to an exempt non-charitable related organization. Please complete line 52, confirming that Schedule A is attached. All section 501(c)(3) organizations must attach Schedule A.
Attach Schedule O when the organization needs to provide supplemental information in response to specific questions or when additional space is needed. Schedule O is not mandatory for all filers. Attach Schedule A if section 501(c)(3) or section 4947(a)(1) trust. Attach Schedule G if gaming exceeds $15,000 or fundraising exceeds $15,000. Attach Schedule L if excess benefit transactions or interested-person loans occurred. Attach Schedule C if political expenditures or lobbying occurred. Attach Schedule N if liquidated or disposed of more than 25 percent of assets.
Sign and date. The authorized officer must sign under penalties of perjury. Provide name, title, and date. Paid preparers must sign and provide their Taxpayer Identification Number. File electronically by the 15th day of the 5th month after year-end. Calendar year organizations file by May 15, 2022. Request an automatic extension using Form 8868 before the original due date.
Key 2021 Form Updates
Beginning tax year 2020, Form 1099-NEC replaced Form 1099-MISC box 7 for nonemployee compensation. The Form 990-EZ instructions refer to Form 1099-NEC, Box 1, throughout. Line 12 specifies that you should include Form 1099-NEC, Box 1, for nonemployee compensation, and either Form W-2, Box 1, or Box 5, depending on which amount is greater, for employees. Lines 44a and 44b clarified that donor-advised fund sponsors and hospital operators must file Form 990, rather than Form 990-EZ, regardless of their size.
Electronic Filing Requirements
For tax years ending on or after July 31, 2021, Form 990-EZ must be filed electronically. IRS accepts paper filing only for tax years ending before July 31, 2021. Organizations reporting name changes are required to file on paper and include the necessary documentation. Organizations required to file electronically that fail to do so are deemed not to have filed, even if a paper return is submitted.
Compliance Standards
Organizations failing to file for three consecutive years face automatic revocation of their tax-exempt status. Organizations with higher gross receipts face penalties of $20 per day up to the lesser of $10,000 or five percent of gross receipts unless late filing is due to reasonable cause.
Incomplete returns may result in penalties and IRS requests for missing information. Organizations must complete all line items, answer each question unless instructed to skip, make entries including zero when appropriate, and provide required explanations.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
