Many people may have not even received their personal tax refund—or worse yet, just paid their tax bill—when the nonprofit tax form is due. It’s the dreaded Form 990 (or some variation of it). For most nonprofits, this form is due five months and 15 days after the calendar year ends: May 15.
Filing An Extension
If you need more time to file your Form 990, your nonprofit can file an extension request with Form 8868. Each request must be for a single organization and must be for a full tax year (not a short year). In most cases, you will file for an automatic three-month extension. If this is the case, you only need to fill out Part 1. If you need more time than that, you must fill out Part II as well.
The extension is simple to complete and is only two pages. The most difficult part is estimating the tax liability if your nonprofit has any unrelated business income (UBIT). The IRS only grants an extension for the tax form. Any taxes your organization may owe are still due by May 15, and you’ll need to complete Form 990-T.
You will need to briefly explain why Form 990 cannot be filed in a timely manner. The IRS will not approve applications that only list “illness” or “CPA is too busy,” so give a more detailed explanation.
Paying The Taxes Due
Question number 3 requires the preparer to fill in a tentative tax amount, less credits. The difference is the tax due, and it must be paid by May 15. If the tax due is underestimated, the nonprofit will be charged interest and a penalty on the underpayment by the IRS. You may be saying, “If I knew what the tax was, I wouldn’t need an extension!” We sympathize. One way to estimate the tax is to start with last year’s tax due (Form 990-T). Estimate any difference based on the current year’s activity. There are many items to consider that could make that estimate vary greatly form the prior year, such as a higher or lower unrelated business income, higher tax rates, and prepaid tax amounts.
Filing Form 8868 may be necessary to put the nonprofit’s financial data in order. If you then properly file the report by the new due date (August 15), and you’ve paid the balance due by May 15, filing for an extension will not jeopardize your nonprofit’s tax-exempt status. Remember, the quickest way to lose your nonprofit status is by not filing your tax forms in a timely manner.
The extension (Form 8868) must be postmarked by the nonprofit’s tax return due date (normally May 15). You can find the instructions for this form on Page 3 after the Form 8868. Don’t forget to sign it and keep a copy for yourself.