Tax-exempt organizations will be required to electronically file information returns and related forms starting in 2020. The Taxpayer First Act, enacted July 1, affects tax-exempt organizations in tax years beginning after July 1, 2019.
Exempt organizations that file on a calendar-year basis will not be subject to the mandate for the year that ends Dec. 31, 2019. However, those organizations should still consider moving to electronic filing this year if early adoption makes sense for them. Even if an organization chooses to file its 2019 forms on paper, organization leaders should plan ahead for electronic filing in 2020 and discuss any concerns with their preparer.
The following IRS forms are included in the mandate:
- Form 990, Return of Organization Exempt from Income Tax. (The IRS will postpone the required e-filing of Form 990-EZ for one year, while optional e-filing continues to be available.)
- Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation.
- Form 8872, Political Organization Report of Contributions and Expenditures.
- Form 1065, U.S. Return of Partnership Income (if filed by a Section 501(d) apostolic organization).
If your organization has been filing paper returns, it will receive a letter from the IRS with information about the change.
Filing deadlines and other specifics related to each form are explained below.
Form 990 and 990-PF E-filing
Under the new law, the first effect of the e-filing requirement will be felt on annual returns due before Dec. 15, 2020, from charities and other exempt organizations that generally file Form 990 or 990-PF by the 15th day of the fifth month after their tax year ends in July 2020.
In other words, Forms 990 and 990-PF from organizations with tax years ending July 31, 2020, and later, must be filed electronically. Form 990 and 990-PF filings for tax years ending on or before June 30, 2020, may still be on paper. In the case of a short tax year or certain other circumstances detailed in the 990 or 990-PF instructions, the IRS will continue to accept paper filing, as its systems are not yet able to receive these forms electronically.
Form 990-EZ Transition Relief
For small exempt organizations, the legislation specifically allows a postponement (“transitional relief”). For tax years ending on and before July 31, 2020, the IRS will accept either paper or electronic filing of Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. For tax years ending Aug. 31, 2020, and later, Form 990-EZ must be filed electronically. Generally, Form 990-EZ is for organizations with annual gross receipts less than $200,000 and total assets at tax year end less than $500,000.
Paper Forms 990-T and 4720
In 2020, the IRS will continue to accept paper forms that are pending conversion into electronic format. These include Form 990-T, Exempt Organization Business Income Tax Return, and Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. The IRS plans to have these returns ready for e-filing in 2021 (reporting on tax year 2020).
The IRS will no longer accept paper copies of Form 8872 (used by political parties, campaign committees, political action committees and other organizations covered under Internal Revenue Code Section 527) reporting on periods after 2019. When Form 8872 is used to report information for periods starting on or after January 2020, it must be filed electronically.
Among other requirements, most tax-exempt political organizations have a requirement to file semiannual, quarterly, or monthly reports on Form 8872. To file electronically, the organization must have the username and password it received from the IRS after electronically filing its initial notice (Form 8871).
Plan Now for 2020 Transition
Even if your organization is not required to file electronically yet, it’s never too early to start planning for the transition. Please contact your CRI advisor to learn more about how the electronic filing requirements in the Taxpayer First Act will affect your organization.