We have two subsidiaries (chapters) whose revenue this year will be over $50,000 for the first time. As gross receipts must “normally” be over $50,000 before a Form 990-EZ or full Form 990 is required, should each subsidiary still file the 990-N with this year’s revenue over $50,000? Can they still say that their gross receipts are normally $50,000 or less if their three-year average is under $50,000?
You really have two questions here. May they each file a 990-N electronic postcard which has no financial information and merely confirms that the organizations still exist? And if they may, should they file a 990-N?
The IRS recognizes that $50,000 should not be treated as an exact number and allows certain organizations to file the 990-N with gross receipts of more than $50,000 a year. The instructions for the 990-N says an organization has “normally” received less than $50,000 if:
For an organization in existence for 1 year or less, it has received, or donors have pledged, less than $75,000 during the first year;
For an organization in existence between 1 year and 3 years, it has averaged $60,000 or less in each of its first two years; and
For an organization in existence for 3 years or more, it has averaged receipts of less than $50,000 for the year of the filing and the prior two years.
It sounds like you fit in the third category and may file the 990-N if your most recent three-year average is less than $50,000. If you got $125,000 this year and only $10,000 in each of the prior two years, you would still qualify for the 990-N. The question still remains whether you should file the 990-N.
Do you want to look like a dinky little organization that never gets any money, probably doesn’t do much, and doesn’t have much impact on the world? We have always said a Form 990 is a charity’s most important relations document. A 990-N says nothing and is unlikely to encourage anyone to support your organization. A 990-EZ or a full 990 gives you an opportunity to showcase your most important program service accomplishments and show that, even with relatively little money, you are able to make the community a better place.
In addition, the IRS says a 990-N is not entitled to the status of an actual tax return. If you made a mistake in your calculations, or inadvertently became a private foundation because only a couple of people made contributions, the statute of limitations has not run against the IRS. It can go back over all the years you filed the 990-N when finding errors and calculating penalties.
If you qualify for the 990-N, it is your choice. But a little extra effort to fill out a 990-EZ or a full 990 could have significant benefits.
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