Do I Have to File Form 990 If I Have No Income

As an owner of a nonprofit organization, one of the frequently asked questions is whether filing of Form 990 is required if you do not have any income for the year. Is the absence of donations or revenue enough reason not to fill out the mandatory form from the IRS?

It all depends on the gross income of your organization, tax-exempt status, and filing requirements by the IRS. Let us discuss the filling rules with the help of examples.

Yes. The requirement for the vast majority of exempt organizations is to submit an annual 990-series return or notice filing each year, regardless of their gross receipts.

IRC Section 6033 requires the filing of an annual information return by the vast majority of exempt organizations, regardless of the receipt of any income within the tax year.

These documents assist the IRS in ensuring compliance with the tax-exempt rules and making public information on nonprofit organizations.

However, having no income does not necessarily mean filing the full Form 990. Many small nonprofits can satisfy their annual filing requirement by submitting Form 990-N (e-Postcard).

According to the IRS, organizations with gross receipts normally $50,000 or less are generally eligible to file Form 990-N, provided they meet the other eligibility requirements.

A non-profit corporation typically comes into existence for the purpose of serving a charitable, educational, religious, scientific, or any other exempt purpose and not to earn profits.

In accordance with Section 501(c)(3), qualifying corporations have to be organized and operated exclusively for exempt purposes. The net earnings cannot be used for the benefit of individuals.

It is worth noting that earning a profit does not mean that an organization is not a non-profit.

Consider these two scenarios:

Key takeaway: The nonprofit organization can keep its surplus funds and use them in its future endeavors. What really counts is its purpose and the manner through which it conducts itself.

It is also important to note that having the nonprofit designation by the state laws alone is not enough for having the exempted status by the federal government.
Source - https://www.irs.gov/charities-non-profits/federal-tax-obligations-of-nonprofit-corporations

If your organization received no donations, grants, membership fees, or other revenue during the tax year, its gross receipts may be $0.

Gross receipts refer to the total amounts an organization receives from all sources before deducting costs or expenses. They are different from the surplus remaining after expenses.

For most small tax-exempt organizations with gross receipts normally $50,000 or less, Form 990-N is sufficient to meet the annual IRS reporting requirement.

Understanding Form 990-N With Examples

These examples assume the organization satisfies the IRS gross-receipts test and has no special filing requirements.

For organizations operating for at least three years, the IRS generally uses the average gross receipts over the current and two preceding tax years to determine whether the $50,000 threshold is met. Different tests apply to newer organizations.

Failing to submit a required annual Form 990 series return or notice can create serious consequences, even if your nonprofit has no income.

1. Loss of Tax-Exempt Status
According to IRC Section 6033(j), any organization which does not file its annual return or notice within three consecutive years will be automatically disqualified from maintaining tax-exempt status.

Once the tax-exempt status is revoked, there may be the imposition of federal income taxes and may require requalification for tax-exempt status.

2. IRS Late Filing Penalties
The filing of Forms 990 or 990-EZ is subject to late filing penalties as per IRC Section 6652(c), unless reasonable cause exists.

Nevertheless, there is no monetary late filing penalty imposed on Form 990-N. Despite this, failure to submit three annual filings consecutively will result in automatic termination of tax-exempt status.

3. Loss of Public Trust
The IRS makes Form 990 series filings and Form 990-N notices available through its Tax Exempt Organization Search. Non-filing and revocation of tax exemption can be a cause for concern for the organization’s donors and grantors.

4. Additional Compliance Requirements
Tax-exempt organizations that fail to maintain their tax-exempt status might have to file their federal income tax forms and go through the IRS reinstatement process.

If your organization has zero income and meets the applicable eligibility requirements, you can generally satisfy your annual reporting obligation by filing Form 990-N (e-Postcard).

Can Form 990-N Be Filed Manually?
No. The IRS requires Form 990-N to be filed electronically. There is no paper version available for mailing to the IRS.

To simplify your filing experience, choose eFile990, an IRS-authorized e-file provider offering online Form 990 filing services for all series of Form 990. Its guided filing process helps you prepare and electronically submit your annual notice.

For details related to Who must file Form 990-N refer to the official IRS page.

Form 990-N must be filed annually by the 15th day of the fifth month following the end of the organization's tax year.

For example, if your nonprofit follows the calendar year ending December 31, its Form 990-N is generally due May 15 of the following year, subject to weekend and holiday adjustments.

Conclusion
Having no income does not automatically exempt your nonprofit organization from filing an annual IRS return or notice. Most small tax-exempt organizations with gross receipts normally $50,000 or less can meet their filing requirements using Form 990-N.

Even if your organization received no donations or conducted no financial activities, filing the required annual notice helps maintain compliance with IRS regulations. Missing three consecutive required filings can result in automatic revocation of tax-exempt status.

File your Form 990-N Online with eFile990 and keep your nonprofit's annual filing requirements on track.