A Layman's Guide to Filing for Small Tax-Exempt Organizations

What the Form Is For

Form 990-EZ is the ""short form"" annual information return that eligible tax-exempt organizations file with the Internal Revenue Service (IRS). Think of it as a streamlined financial snapshot that shows the IRS—and the public—how your nonprofit organization operated during the tax year.

The form serves several important purposes. First and foremost, it's how your organization maintains its tax-exempt status by demonstrating compliance with federal tax laws. The IRS uses Form 990-EZ to monitor whether your organization is operating according to its exempt purpose and following the rules that come with tax exemption. Second, because most of the form becomes publicly available, it's your organization's financial transparency document. Donors, grantmakers, researchers, and the general public often rely on Form 990-EZ as their primary source of information about your organization's activities, finances, and governance. How your organization is perceived by stakeholders may be determined by what you report on this form.

Organizations eligible to file Form 990-EZ for 2012 must meet two conditions: gross receipts less than $200,000 during the tax year, and total assets less than $500,000 at year-end. If your organization exceeds either threshold, you must file the longer Form 990 instead. However, certain organizations must always file Form 990 regardless of size, including: sponsoring organizations of donor-advised funds, organizations operating hospital facilities, section 501(c)(29) nonprofit health insurance issuers, and controlling organizations described in section 512(b)(13).

The form collects information across six main areas. Parts I through V must be completed by all filers and cover revenue, expenses, balance sheets, program accomplishments, officers and directors, and other compliance information. Section 501(c)(3) charitable organizations must also complete Part VI with additional questions specific to public charities. Depending on your activities, you may need to attach various schedules covering topics like fundraising events (Schedule G), related organizations (Schedule R), or lobbying activities (Schedule C for 501(c)(3) organizations).

When You’d Use It (Regular, Late, and Amended Returns)

Regular Filing Deadline

Form 990-EZ is due by the 15th day of the 5th month after your organization's accounting period ends. For calendar-year filers, this means May 15. If your organization uses a fiscal year ending June 30, 2012, your return would be due November 15, 2012. When the due date falls on a weekend or legal holiday, you file on the next business day.

Extensions

You can request an automatic 3-month extension using Form 8868. No explanation is required for this initial extension. If you need even more time, you can request an additional 3-month extension (for a total of 6 months), but this second extension is not automatic—you must demonstrate reasonable cause for needing the extra time.

Late Filing

If you miss the deadline, file as soon as possible and attach a statement explaining why you're late. The IRS imposes penalties for late filing: $20 per day for each day the return is late, up to the smaller of $10,000 or 5% of your organization's gross receipts for the year. For organizations with annual gross receipts exceeding $1 million, the penalty jumps to $100 per day, with a maximum penalty of $50,000. These penalties can be waived if you can show the late filing was due to reasonable cause and not willful neglect.

Critical Three-Year Rule

If your organization fails to file for three consecutive years, the IRS will automatically revoke your tax-exempt status as of the due date for the third annual return. This can trigger income tax obligations and require you to apply for reinstatement—a costly and time-consuming process.

Amended Returns

You can file an amended Form 990-EZ any time after filing your original return if you need to correct or add information. Use the version of Form 990-EZ for the year being amended (in this case, the 2012 form). Check the ""Amended return"" box in Item B of the heading, complete the entire form with corrected information, and list in Schedule O which parts you amended and describe the changes. Amended returns must be made available for public inspection for 3 years from the filing date or 3 years from the original due date, whichever is later.

Key Rules for 2012

Eligibility Thresholds

Several important rules governed Form 990-EZ filing in 2012. Understanding these helps ensure compliance and avoid common pitfalls.

Eligibility Thresholds: You qualify to file Form 990-EZ only if your gross receipts are less than $200,000 AND total assets at year-end are less than $500,000. Exceed either threshold, and you must file Form 990 instead. ""Gross receipts"" means the total amounts received from all sources during the year without subtracting costs or expenses. This includes contributions, program service revenue, investment income, and other income. ""Total assets"" is the amount on your balance sheet at year-end before reducing for liabilities.

Mandatory Electronic Filing

Mandatory Electronic Filing: In 2012, organizations with at least $10 million in total assets at year-end that filed 250 or more returns of any type during the calendar year were required to file Form 990-EZ (or Form 990) electronically. All other organizations could choose to file electronically or by paper. Organizations required to file electronically that submit paper returns are considered to have failed to file, even if the paper return is submitted—unless they're reporting a name change, which requires paper filing with supporting documentation.

Public Disclosure Requirements

Public Disclosure Requirements: Everything you report on Form 990-EZ, including schedules and attachments, is generally available for public inspection—both by the IRS and by your organization upon request. The major exception is Schedule B (Schedule of Contributors), which lists donors who gave $5,000 or more. For most organizations, contributor names and addresses on Schedule B are not publicly disclosed. However, section 527 political organizations must make their entire Schedule B available for public inspection. Because returns are public documents, never include Social Security numbers on Form 990-EZ or its schedules.

Short Period Returns

Short Period Returns: If your organization changed its accounting period in 2012 or filed a final return due to dissolution, you may have needed to file a short-period return covering less than 12 months. Short-period returns cannot be filed electronically unless they are final returns with the ""Terminated"" box checked.

Accounting Methods

Accounting Methods: Generally, use the same accounting method (cash or accrual) on Form 990-EZ that you use for your regular bookkeeping. The method must clearly reflect income. If you change accounting methods, you may need to file Form 3115 (Application for Change in Accounting Method) and report any section 481(a) adjustment in Schedule O.

State Reporting

State Reporting: Many states accept Form 990-EZ to satisfy state charitable registration and reporting requirements. The organization may need to use the same copy of Form 990-EZ submitted to the IRS for state filing purposes, so ensure your return meets both federal and applicable state requirements.

Step-by-Step (High Level)

Step 1 - Gather Financial Records

Collect your financial statements, receipts, invoices, payroll records, and other documentation covering the entire tax year. You'll need information about revenue from all sources, expenses by category, asset and liability balances, and compensation paid to officers, directors, and key employees. Ensure your records clearly distinguish between program service activities, management and general expenses, and fundraising costs.

Step 2 - Complete the Heading

Fill in identifying information including your organization's legal name, employer identification number (EIN), address, accounting period, and check applicable boxes (such as whether the return is initial, final, amended, or address change). Indicate which schedules you're attaching.

Step 3 - Complete Required Parts

All organizations must complete Parts I through V. Part I reports revenue, expenses, and changes in net assets. Part II is your balance sheet showing assets, liabilities, and net assets at year-beginning and year-end. Part III describes your program service accomplishments—this is where you explain what your organization actually did to further its exempt purpose. Part IV lists officers, directors, trustees, and key employees with their compensation. Part V addresses various compliance questions about political activities, lobbying, gaming, fundraising, and other matters. Section 501(c)(3) organizations must also complete Part VI with additional questions about their activities.

Step 4 - Complete Required Schedules

Based on your activities and answers to questions in Part V, you may need to complete and attach various schedules. Common schedules include Schedule A (required for all 501(c)(3) organizations to demonstrate public charity status), Schedule B (required if any contributor gave $5,000 or more), Schedule G (required if fundraising events generated more than $15,000), and Schedule O (used to provide explanations for various questions throughout the form).

Step 5 - Review for Completeness and Accuracy

Before filing, carefully review every line. Make sure you've entered an amount or checked a box for every applicable line—don't leave lines blank unless instructed to skip them. Verify that your financial information reconciles (for example, that revenues minus expenses equals the change in net assets, and that assets minus liabilities equals net assets). Ensure explanations in Schedule O are clear and complete. Check that all required schedules are attached.

Step 6 - Obtain Proper Signature

Form 990-EZ is not complete without a signature from an authorized officer (president, vice president, treasurer, or similar) who declares under penalty of perjury that the return is true, correct, and complete. If a paid preparer completed the return, they must also sign in the designated section and provide their information.

Step 7 - File by the Deadline

Mail paper returns to: Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0027. For electronic filing, use an IRS-authorized e-file provider. Keep copies of your filed return and all supporting documentation for at least 3 years (longer for records supporting property basis or if required by state law).

Common Mistakes and How to Avoid Them

Leaving Lines Blank

One of the most common errors is leaving applicable lines blank instead of entering ""-0-"" or checking a box. This can result in an incomplete return and trigger penalty notices. Solution: Review the entire form and enter something on every applicable line. If the amount is zero, enter ""0."" If a question doesn't apply, make sure you're correctly interpreting the instructions before leaving it blank.

Netting Revenue and Expenses

Many organizations incorrectly report revenue net of related expenses, particularly for special events. For example, if your fundraising dinner generated $25,000 in ticket sales but cost $15,000 to hold, you must report the full $25,000 as revenue and the $15,000 as expenses—not just the $10,000 net. Solution: Always report gross revenue and separate expenses unless the instructions specifically say otherwise.

Missing or Incomplete Schedule B

Organizations receiving individual contributions of $5,000 or more must file Schedule B listing those contributors. Some organizations mistakenly believe only foundations or government grants count, but individual donations of $5,000+ must be reported too. Solution: Review all donations received during the year and list any single contributor (individual, corporation, foundation, or government) who gave $5,000 or more in total.

Compensation Reporting Errors

Organizations often report incorrect amounts for officer compensation or fail to report compensation from related organizations. Part IV requires listing total compensation from your organization AND related organizations, and also requires reporting other compensation like benefits and deferred compensation. Solution: Carefully review the Part IV instructions. Include all compensation from the filing organization, related organizations, and for 501(c)(3) organizations, also report additional compensation details in Part VI.

Incorrect Public Charity Status

Section 501(c)(3) organizations must complete Schedule A to support their public charity status. Common errors include using the wrong public support test, math errors in calculating percentages, or failing to update the schedule when circumstances change. Solution: Carefully review Schedule A instructions each year and consider whether your organization still qualifies under the same public charity category.

Failing to Explain ""Yes"" Answers

Many questions in Parts V and VI require explanations in Schedule O if you answer ""Yes."" Simply checking ""Yes"" without providing the required explanation makes your return incomplete. Solution: As you complete the form, mark any ""Yes"" answers that reference Schedule O, then prepare detailed explanations for each.

Filing Wrong Form

Some organizations file Form 990-EZ when they should file Form 990 (because they exceeded the gross receipts or asset thresholds), or file Form 990-EZ when they're required to file Form 990 regardless of size (such as hospitals or donor-advised fund sponsors). Solution: Review eligibility rules each year before deciding which form to file. When in doubt, consult the ""Who Must File"" section of the instructions.

Missing the Three-Year Deadline

Organizations sometimes believe they can skip filing because they're ""not active"" or had minimal income. Remember: three consecutive years of non-filing triggers automatic revocation. Solution: Mark your calendar with the filing deadline each year, or set up earlier reminder dates to allow time for preparation.

What Happens After You File

IRS Processing

Once you file, the IRS processes your return and updates its records. Processing times vary—paper returns typically take longer than electronic filings. The IRS reviews returns for completeness and obvious errors. If issues are identified, you may receive correspondence requesting corrections or additional information. Respond promptly to any IRS letters; most issues can be resolved through correspondence without formal examination.

Public Disclosure Obligations

Within the year after filing, your Form 990-EZ becomes publicly available through the IRS. Your organization must also make copies available upon request. You must provide copies within 30 days of a written request (or immediately for in-person requests at your principal office). You can charge reasonable copying and postage fees. Instead of providing paper copies, you can direct requesters to your website if your Form 990-EZ is posted there in a format that can be downloaded and printed.

State Compliance

If you used Form 990-EZ to satisfy state registration or reporting requirements, state agencies will review your filing under their rules. Some states require separate submissions even if you filed with the IRS. Some states impose their own penalties for late filing or incomplete returns. Keep records of when and how you submitted returns to each applicable state.

Record Retention

Keep your filed Form 990-EZ and all supporting documentation for at least 3 years from the due date or filing date, whichever is later. Records supporting property basis should be retained longer. Many organizations keep returns permanently as part of their institutional records. These records may be needed if the IRS requests clarification, if you file an amended return, or for state audit purposes.

Subsequent Year Preparation

Your 2012 Form 990-EZ affects your 2013 filing. Beginning-of-year amounts on your 2013 balance sheet should match end-of-year amounts from 2012. Schedule A public support calculations use multi-year data, so accurate prior-year information is essential. Use your 2012 return as a reference point for consistent reporting.

Potential IRS Examination

While most returns are simply processed, the IRS can select your return for examination. Examinations may be correspondence-based (where the IRS requests specific documentation by mail) or involve in-person interviews. Maintain good records to support all amounts reported. Common examination issues include unrelated business income, compensation reasonableness, and public charity status. Having an amended return doesn't necessarily trigger examination, but does extend the examination period for the amended items.

FAQs

Q: Our organization's gross receipts are normally less than $50,000. Do we still file Form 990-EZ?

A: No, you're not required to file Form 990-EZ. Organizations whose gross receipts are ""normally"" $50,000 or less can satisfy their annual reporting requirement by submitting Form 990-N (the e-Postcard), which is much simpler. ""Normally"" means your average gross receipts over the past 3 years are $50,000 or less. However, you can voluntarily file Form 990-EZ even if you're eligible for the e-Postcard, which provides more complete financial information to stakeholders and may be required by some grantmakers. Exception: Section 509(a)(3) supporting organizations must file Form 990 or 990-EZ even if their gross receipts are normally $50,000 or less.

Q: We're a church. Do we need to file Form 990-EZ?

A: No. Churches, integrated auxiliaries of churches, conventions or associations of churches, and certain other religious organizations are exempt from filing Form 990-EZ (see General Instruction B of the 2012 instructions). This exemption covers recognized churches and their integrated auxiliaries (like a men's or women's organization, religious school, or youth group) that meet the definition in IRS regulations. However, church-affiliated organizations that don't qualify as integrated auxiliaries—such as separately incorporated religious schools or nonprofit ministries—may have filing requirements. Additionally, private schools operated by churches must show they don't discriminate to maintain exemption, which may involve filing.

Q: Can I file Form 990-EZ electronically, or must I mail it?

A: For 2012, you have a choice unless you meet certain criteria. You can file electronically through an IRS-authorized e-file provider, and many organizations prefer electronic filing because it's faster and has lower error rates. However, mandatory electronic filing applies if your organization has total assets of $10 million or more at year-end AND filed 250 or more returns of any type during the calendar year ending with or within your tax year. If you're required to file electronically but don't, your return is considered not filed even if you submit a paper copy. The exception is name changes, which must be filed on paper with supporting documentation attached.

Q: Do we need to report donors' names and addresses, and will they be made public?

A: It depends on the donation size. If any single contributor gave $5,000 or more during the year (whether in a single donation or multiple donations totaling $5,000+), you must report that contributor on Schedule B. For most tax-exempt organizations, Schedule B contributor information is NOT publicly disclosed—the IRS removes it before making returns available to the public. However, section 527 political organizations must make their entire Schedule B publicly available. Your organization must still maintain records of all contributors for internal purposes and for certain state reporting requirements, but only contributors of $5,000 or more appear on Schedule B filed with the IRS.

Q: We changed from a calendar year to a fiscal year ending June 30. How does this affect our 2012 filing?

A: You'll need to file a short-period return covering the transition period. For example, if you previously used a calendar year and switched to a fiscal year ending June 30, 2012, you'd file a 2011 or 2012 Form 990-EZ for the short period from January 1 to June 30, 2012. Enter ""Change of Accounting Period"" at the top of the short-period return. If you previously changed your accounting period within the past 10 calendar years, you must also attach Form 1128 (Application to Adopt, Change, or Retain a Tax Year) to the short-period return. Short-period returns cannot be filed electronically unless they are final returns with the ""Terminated"" box checked.

Q: Our organization had $125,000 in gross receipts but $600,000 in total assets. Which form do we file?

A: You must file Form 990, not Form 990-EZ. To qualify for Form 990-EZ, you must meet BOTH requirements: gross receipts less than $200,000 AND total assets less than $500,000 at year-end. Since your assets exceed $500,000, you exceed the 990-EZ threshold even though your gross receipts are under $200,000. Form 990 is more detailed but follows a similar structure. Organizations often cross this threshold when they own buildings, have significant investments, or hold endowment funds.

Q: What happens if we discover an error after we've already filed?

A: File an amended return as soon as you discover a significant error or omission. Use the 2012 Form 990-EZ to correct a 2012 return. Check the ""Amended return"" box in Item B, complete the entire form with corrected information (not just the changed items), and explain in Schedule O which parts you amended and what changed. The IRS generally allows amended returns without penalty if you correct errors proactively. However, if an error results in understated unrelated business income or other tax liability, you may owe taxes, interest, and potentially penalties. File amended returns promptly—don't wait for the IRS to discover the error. Note that filing an amended return extends the time the IRS has to examine those items.

Sources: All information is derived from authoritative IRS sources including the 2012 Instructions for Form 990-EZ and 2012 Form 990-EZ, available on IRS.gov.