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Tax Exempt Tax Filing Updates

There’s an oxymoron in this title, right? Over the past few months, we’ve noticed New York State (NYS) and the Internal Revenue Service (IRS) are coming into the 21st Century. We’ll break down some of the significant changes that can impact your organization’s 2021 tax filing and into the future.

Starting with the Federal filings, Form 990-EZ’s are required to be e-filed for fiscal years ending July 31, 2021, forward. Paper filings via mail will no longer be accepted and your return would be considered late or deficient. The IRS initially attempted to implement this requirement earlier but provided “transitional relief” in response to the pandemic. Organizations will need to seek assistance from qualified e-file providers in order to complete their annual filings.

With these new filing requirements, now is a good time to review exactly what the reporting thresholds are for a Form 990-EZ. Filing thresholds are based on the organization’s “gross receipts”. Gross receipts are defined by the IRS as “all sources of revenue without subtracting any costs or expenses”. Organizations with gross receipts of less than $200,000 and total assets of less than $500,000 can chose to file a Form 990-EZ instead of a Form 990. The gross receipts are presented on Form 990-EZ page 1 line L as the sum of line 9 total revenue plus lines 5b, 6c, and 7b. The calculation adds back the reported deductions associated with investments, inventory, and special events to determine the total gross receipts.

Looking at New York State filings, there have been a couple of changes over the past year, with some applying to future filings. In response to a current U.S. Supreme Court decision, NYS is currently suspending the collection of Federal Form 990 Schedule B “Schedule of Contributors” as an attachment to the CHAR500. The identification of any donor is not going to be requested nor will a return be considered deficient for not providing such information. Private foundations, however, are still required to submit this schedule. NYS is no longer accepting lines such as “other grants” or “miscellaneous grants” listed on the CHAR500 Schedule 4b: Government Grants. All government grant awards whether from federal, state, or local agencies (as well as interstate or state and local authorities) are required to be listed by grantor. Organizations should review this schedule prior to filing to ensure its completeness and accuracy.

NYS has officially opened an online portal for annual financial filings. Organizations will login and complete a formal step by step process for submission which includes uploading any additional attachments such as the IRS Form 990. Third-party preparers are permitted to complete the online filing on behalf of organizations. The online portal allows for credit card payment or E-check for the calculated annual filing fee.

Effective for fiscal years beginning on or after July 1, 2021, the NYS thresholds for requiring an audit report will increase to $1,000,000 in total revenue and support. For filers with years beginning prior to that date, the audit threshold requirement is still $750,000. Per NYS CHAR500, total support and revenue is the amount reported on Form 990-EZ Part I line 9 or Form 990 Part I line 12. This is not the same as gross receipts defined above. Organizations should review their recent financial activity to determine if they qualify for only a review report as opposed to an audit report from an Independent Certified Accountant.

We encourage organizations to review their current calculations of gross receipts and total revenue and support to determine any implications these changes may have on its annual federal and state filings.

If you need further guidance or have any questions on this topic, we’re here to help. Please do not hesitate to reach out to our trusted experts to discuss your specific situation. Happy filing season!

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.