How To Prepare a Tax Return for a Nonprofit

Nonprofit organizations are groups that support causes benefiting special interest groups, or the public at large. Due to the largely altruistic role that these organizations undertake in society, the government usually gives them leeway in tax responsibilities. Not only that, but the government also gives tax incentives to individuals and corporate entities that donate to charitable causes. Despite this exemption from taxes, nonprofit organizations are still required to file for annual reports. This is also done in an effort to show the transparency of the organizations as far as accounting for their total revenues from donations and other dole outs, as well as costs.

Not all nonprofit organizations are given this privilege of being tax exempt though. Only those organizations who have filled out the necessary IRS forms and those who actually applied for this special status qualify for such a privilege.

There are various forms that are used for these processes and one has to be very familiar with each to be savvy in managing the financial documents of a nonprofit organization.

These are the forms that you may use:

  • Form 1023, which is an application for exemption;
  • Form 1024, another application for exemption;
  • Form 1120-POL, intended for political organizations;
  • Form 8868, which is to request for extension of the required filing period;
  • Form 990, the actual tax return for exempt organizations;
  • Form 990-N, the actual tax return for exempt organizations earning $25,000 or less annually;
  • Form 990-EZ, another short form that may be filled up by tax-exempt organizations;
  • Form 990-PF, the tax return of a foundation that is a non-exempt charitable trust;
  • Form 990-BL, another return form for charitable trusts.

These forms are accessible online via tha official IRS website at In lieu of securing the forms physically, you may download these PDF versions, fill them in on your computer, and then print them out for easy filing with your local IRS office.

Here are some tips to help you file your tax documents as a nonprofit organization.

  1. First, verify the status of your nonprofit organization. Don't take for granted the fact that you are a charitable or a nonprofit organization, because you have to also be recognized by the authorities as such. Check whether your original application has been approved, and that you are indeed tax exempt.
  2. Ensure that all your documents are well taken care of. Keep them organized and erasure-free.
  3. Keep records and receipts of all charitable donations. This will be tallied against the returns of the people who claim to have made a tax deductible donation to your organization.
  4. Learn about the filing instructions such form 990 instructions, form 557 and 598.
  5. You may choose to file your returns online to make the process faster.
  6. Consult a lawyer or the IRS' tax preparation services if you need clarifications.

It's the citizen's duty to support its government and society by paying taxes. However, as a nonprofit organization, you are usually doing the government a favor by taking some important socially-oriented tasks of its hands, like undertaking social projects, addressing social needs and the general welfare of the needy. In this regard, government recognizes these, and grant some benefits in the form of a tax-free or reduced tax status.


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