Small organizations: Filing exceptions to Form 1023 and filing requirements for Form 990

 

There is some confusion out there between the changing of the Form 990 (or 990N) filing requirements  and the requirement to file Form 1023 to be tax exempt.  There is still an exeception for the need to file form 1023 to gain exemption for small organizations with gross receipts normally less than $5,000 (as well as for churches , religious organizations etc).  The small organization exception takes the current and prior 2 years into account and is different for new organizations existing less than 3 years.  This is based on gross receipts without reducing for any expenses (special event expenses, cost of goods sold, etc.)

Organizations Automatically Exempt under the Gross Receipts Test-  An organization normally has gross receipts of $5,000 or less if all of the following apply: 1. Gross receipts during its first tax year are $7,500 or less. 2. Gross receipts during its first two tax years combined are $12,000 or less.    3. Total gross receipts during the immediately preceding two years plus the current year are $15,000 or less (for an organization that has existed for at least three years).
The annual requirement to file a Form 990 used to (i.e. Not any more!) have a small organization exception (gross receipts normally under 25k). The changes in the 990 filing requirements (since 2008) now eliminate that exeception and all organization need to file a form 990 , 990ez or 990N. (churches and religious orgs still don't need to file). Even organizations that did not have to file a form 1023 to gain exemption under the $5,000 gross receipts exception need to file at least a 990N annually.
Interestingly, an organization that did not have to file form 1023 under the $5,000 gross receipts exception can still be revoked for not filing for 990.  in that case an organization must apply (ie file form 1023)  to have its tax exempt status reinstated, even if not originally required to file an application.....JV