What IRS Form 990-T (2019) Is For

IRS Form 990-T (2019) is used by tax-exempt organizations to report and pay tax on unrelated business income that does not directly relate to their exempt or charitable purpose. The form helps the IRS identify taxable income earned outside an organization’s primary exempt functions and determine the appropriate tax liability under the Unrelated Business Income Tax (UBIT) rules.

This form applies to entities such as nonprofits, charitable foundations, pension plans, and IRAs that earn more than $1,000 in gross unrelated business income during the tax year. Completing and submitting the 2019 version ensures compliance with IRS regulations and maintains transparency for tax-exempt organizations conducting business activities beyond their exempt missions.

When You’d Use Form 990-T (2019)

Organizations should file Form 990-T (2019) in specific cases involving late, corrected, or amended filings:

1. Late filing after the original deadline: The form must be filed if an organization missed the May 15, 2020, deadline for calendar-year filers or the 15th day of the fifth month after the end of a fiscal year.
   
   
2. Amended return for corrections: The form should be submitted when an organization identifies errors, omissions, or unreported unrelated business income on a previously filed return.
   
   
3. Retroactive fringe benefit adjustments: The form claims refunds related to qualified transportation fringe exclusions that applied retroactively to the 2019 tax year.
   
   
4. IRS notice follow-up: The form must be filed when the IRS issues a notice indicating missing returns or requests clarification about prior filings.

Key Rules or Details for 2019

The 2019 filing year introduced several vital updates that affected how tax-exempt organizations report unrelated business income and calculate their tax obligations:

1. Siloing requirement: Each unrelated business activity must be reported separately, and losses from one activity cannot offset income from another.
   
   
2. Net operating losses (NOLs): Net operating losses generated after 2017 must be tracked separately and may only be carried forward; they can no longer be taken back to prior tax years.
   
   
3. Transportation fringe exclusion: Legislation passed in late 2019 retroactively excluded qualified transportation benefits, such as parking and transit, from unrelated business taxable income.
   
   
4. Schedule M attachment: Each unrelated business must have its own Schedule M to meet the reporting standards under Section 512(a)(6) of the Internal Revenue Code.

Step-by-Step (High Level)

Before completing IRS Form 990-T (2019), organizations should follow these essential steps to ensure accuracy and compliance:

1. Confirm prior filing history: Organizations should request IRS transcripts for the 2019 tax year to verify whether a return has already been filed and to review any previous activity.
   
   
2. Use the correct form version: The 2019 edition of Form 990-T must be used to ensure proper alignment with tax-year-specific rules and schedules.
   
   
3. Apply siloing rules correctly: Each unrelated trade or business should be calculated and reported separately to comply with the requirement.
   
   
4. Attach required schedules and forms: Organizations must include all relevant schedules (A through M), Form 8997 if applicable, and any supporting statements or documentation.
   
   
5. Submit the return properly: The completed return should be mailed to the IRS Processing Center in Ogden, Utah, or sent through an approved private delivery service.
   
   
6. Maintain accurate documentation: Copies of the return, schedules, receipts, and related correspondence must be kept for at least three years in case of an IRS audit or review.

Common Mistakes and How to Avoid Them

Understanding frequent errors when filing IRS Form 990-T (2019) can help organizations prevent delays and avoid IRS penalties:

• Combining business activities: To comply with the siloing rule, each unrelated trade or business must be reported separately on Schedule M.
  
  
• Reporting transportation fringes: Qualified transportation benefits such as parking or commuter transit must be excluded from unrelated business taxable income in 2019.
  
  
• Incorrect NOL tracking: Net operating losses must be maintained separately for each unrelated business and may only be carried forward, not back.
  
  
• Missing schedules: Every unrelated business activity requires its own Schedule M attachment to ensure accurate reporting.
  
  
• Improper expense allocation: Expenses may only be allocated to unrelated business activities that generate taxable income.
  
  
• Public disclosure issues: Personal or sensitive identifying information must be removed before publicly sharing any returns or financial records.

What Happens After You File

After submitting IRS Form 990-T (2019), the IRS typically processes the return within six to eight weeks. Organizations may receive a refund, a balance due notice, or correspondence requesting additional clarification or documentation. If taxes remain unpaid, an installment agreement may be requested using Form 9465. 

Interest and penalties will continue to accrue until payment is completed. If the IRS findings are disagreeable, the organization may appeal through the Independent Office of Appeals for further review.

FAQs

How do I include my employer identification number on Form 990-T (2019)?

You must provide your employer identification number (EIN) in the upper section of the form to identify your organization as a recognized tax-exempt entity. This ensures the IRS correctly associates your filing with your tax exemption status and maintains accurate business income tax return records.

How is taxable income calculated on IRS Form 990-T (2019)?

Taxable income is calculated by subtracting allowable deductions directly connected to unrelated business activities from total unrelated business revenue. The resulting amount determines the organization’s tax under section 511, which governs the unrelated business income tax for exempt entities.

What qualifies as organization business income tax for exempt entities?

An organization's business income tax applies to revenue generated from activities unrelated to its exempt purpose. This includes sales, services, or property rentals not furthering the charitable or educational goals outlined in the original return filed with the IRS.

What is considered exempt organization business income?

Exempt organization business income refers to earnings from trade or business activities conducted by a tax-exempt organization that are not part of its primary exempt function. Certain exceptions may apply for private foundations and other entities that comply with their approved tax exemption.