Article

Electronic filing for tax-exempt organizations – new rules under the Taxpayer First Act

April 2, 2020 · Authored by Larry Mohr, Shelby T. Netz

Background

On July 1, 2019, the Taxpayer First Act (TFA) was enacted into law, granting taxpayers more rights and changing the Internal Revenue Service (IRS) administrative procedures to be more taxpayer-friendly. The IRS plans to meet the TFA requirements by developing comprehensive customer service, modernizing its technology and enhancing its cyber security. In addition, the TFA mandates electronic filing for certain tax-exempt organizations. With the electronic filing requirement, the intent of TFA is to expand access to Form 990 information.

Pre-TFA tax-exempt organization filing requirements

Prior to the effective date of the TFA, a tax-exempt organization was required to electronically file its Form 990 if it:

1. Filed at least 250 returns of any type during the calendar year: including income tax, employment tax and information returns (e.g. Forms 1099 and W-2); or
2. Had total assets of $10 million or more at the end of the tax year

In addition, organizations that qualified to file the Form 990-N (having average gross receipts under $50,000 and total assets under the Form 990 threshold) were also required to electronically file their Form 990-N postcard each year.

Any tax-exempt organization that did not meet the two criteria above had the option to file electronically or by mail. There were also exceptions that required paper filing, regardless of whether the two criteria above were met:

• Legal name change
• Short year/short period, except for short period final returns
• Returns from organizations not recognized as exempt
• Returns older than two prior years; a tax-exempt organization filing for the current year or two prior tax years can remit electronically

Conversely, all tax-exempt organizations filing Form 990-T were limited to paper filing since electronic filing of that form was not available.

TFA tax-exempt organization filing requirements

The TFA now mandates that all of the following forms be electronically filed as of the first taxable year beginning after July 1, 2019: