What IRS Form 990-T (2022) Is For

IRS Form 990-T (2022) is required when a tax-exempt organization earns $1,000 or more in unrelated business income during a tax year. The Internal Revenue Service (IRS) uses this form to determine the income tax owed on business activities not substantially related to the organization’s exempt purposes. These activities may include advertising, rental income from debt-financed property, or other unrelated trade operations. The form ensures compliance with the unrelated business income tax (UBIT) provisions under the Internal Revenue Code sections 511–514.

The form applies to a wide range of tax-exempt organizations, including nonprofits, charitable organizations, private foundations, and religious organizations. Filing Form 990-T ensures transparency in reporting and protects an organization’s tax-exempt status. Even if the organization primarily serves charitable or educational missions, any unrelated income must still be reported to the Internal Revenue Service as part of its annual filing requirements.

When You’d Use IRS Form 990-T (2022)

Organizations use IRS Form 990-T (2022) when they must report or amend unrelated business income that does not align with their tax-exempt purposes. The filing is necessary in several situations involving corrections, compliance updates, or previously unreported income.

1. Unreported unrelated business income: An organization must file when income from advertising, rental property, or other unrelated business activities was not included in a prior return.
   
   
2. IRS notices or missing filings: Filing is required when the Internal Revenue Service issues notices indicating the organization failed to meet its annual filing requirements.
   
   
3. Errors or corrections: An amended return must be filed when previously reported gross receipts, expenses, or schedules contained inaccuracies.
   
   
4. Refund or overpayment claims: A return should be filed within three years of the original due date or filing date to recover overpaid taxes.
   
   
5. State-level updates: A revised return is necessary when federal amendments affect related state filings for nonprofit tax returns.

Key Rules or Details for the 2022 Tax Year

IRS Form 990-T (2022) includes several tax updates and compliance rules that tax-exempt entities must follow for accurate filing and reporting. These rules reflect the ongoing effects of the Tax Cuts and Jobs Act (TCJA) and apply specifically to income from unrelated business activities.

1. Siloing requirement: Each unrelated trade or business must be reported separately to ensure that income and expenses are accurately calculated for each activity.
   
   
2. Net Operating Loss (NOL) carryforwards: Post-2017 NOLs can only be carried forward indefinitely and may not exceed 80 percent of taxable income for each unrelated business.
   
   
3. Flat corporate tax rate: Under Internal Revenue Code section 11, a 21 percent tax rate applies to all unrelated business taxable income.
   
   
4. Electronic filing mandate: Since paper submissions are no longer accepted, all returns must be submitted through an IRS-authorized e-file provider.
   
   
5. Quarterly estimated tax payments: Organizations expecting $500 or more in UBIT must make quarterly payments to avoid underpayment penalties.

Step-by-Step (High Level)

Filing IRS Form 990-T (2022) requires careful recordkeeping and attention to the Internal Revenue Service instructions. The following steps outline the general filing process for tax-exempt organizations with unrelated business income.

1. Gather financial records: Collect all unrelated business-related documents and request IRS transcripts using Form 4506-T to confirm filing history and payment data.
   
   
2. Use the correct form and schedules: Always file the 2022 version of Form 990-T, and prepare a separate Schedule A for each unrelated business activity.
   
   
3. Attach additional schedules: Include all applicable schedules, such as Schedules A–K, along with supporting documentation for capital gains, real property, or other income sources.
   
   
4. Submit electronically: File through an IRS-authorized e-file provider to meet federal electronic filing requirements, since paper filing is not permitted.
   
   
5. Retain documentation: Keep copies of all filed returns, proof of submission, and related financial statements to ensure compliance with annual filing obligations.

Common Mistakes and How to Avoid Them

Avoiding common filing errors helps ensure compliance with the Internal Revenue Service and protects an organization’s tax exemption. Many charitable organizations, nonprofits, and educational institutions make mistakes that delay processing or result in penalties.

• Combining unrelated activities: Each unrelated trade or business must be reported on its own Schedule A; combining activities may cause the return to be rejected.
  
  
• Miscalculating NOLs: Use current carryforward rules and apply the 80 percent limitation; older carryback provisions no longer apply under the Internal Revenue Code section 512.
  
  
• Skipping estimated tax payments: Organizations expecting more than $500 in unrelated business income tax must make quarterly payments to avoid penalties and interest.
  
  
• Using the wrong tax year form: Filing with the incorrect form, such as a prior-year version, can result in rejection or assessment of additional taxes.
  
  
• Overstating income or expenses: Review all gross receipts, property income, and expenses carefully to ensure accuracy for your nonprofit corporation.
  
  
• Attempting to paper file: The IRS no longer accepts paper returns; all nonprofit tax returns must be submitted through authorized electronic filing systems.

What Happens After You File

After submitting IRS Form 990-T (2022), the Internal Revenue Service typically processes electronically filed returns within about 21 days. Delays may occur if the organization’s schedules or attachments are incomplete or inconsistent with its reported funds, assets, or expenses. 

The Electronic Federal Tax Payment System (EFTPS) should pay any tax due. If an organization cannot pay the full amount, it can request an installment agreement using Form 9465. Interest and penalties continue to accrue until payment is completed. The IRS may issue notices requesting clarification, and it is essential to respond promptly to maintain tax-exempt status and avoid disruptions in benefits or compliance for the association and its employees.

FAQs

How does filing Form 990-T affect an organization’s tax-exempt status?

Filing Form 990-T does not automatically revoke tax-exempt status, but organizations that fail to file their annual return or report regularly carried business activities may risk compliance issues. Maintaining accurate records and timely filing ensures continued recognition by the Internal Revenue Service.

Which exempt organization must file IRS Form 990-T (2022)?

Any exempt organization with $1,000 or more in unrelated business income must file this form. This includes small organizations, charitable institutions, and other entities operating under public safety or educational purposes.

How does IRS Form 990-T relate to income tax?

IRS Form 990-T applies the income tax rules to unrelated business income earned by tax-exempt entities. Although such organizations are generally exempt, income from activities regularly carried out for profit remains taxable under federal law.

Can charitable contributions affect an organization’s Form 990-T filing?

Yes, charitable contributions may offset unrelated business income when properly reported. However, they must relate to the fiscal year being filed, and records should be kept for verification as part of the annual return.