IRS Tax Returns for 501(c)(3) Nonprofits

Your Arizona nonprofit corporation received its 501(c)(3) determination letter from the IRS. Congratulations. Now comes the part many officers and directors never hear about until a penalty notice arrives: a tax-exempt corporation still has to file returns with the IRS every year. Exempt from income tax does not mean exempt from filing.

This article explains, in plain English, every IRS return an Arizona nonprofit corporation may have to file, when each one is due, what happens if it is late or never filed, what the officers and directors are personally responsible for, and who should prepare each return.

I'm Arizona attorney Richard Keyt. I've practiced law in Arizona since 1979 and have formed 550+ Arizona nonprofit corporations that became 501(c)(3) tax-exempt organizations. The most common way I see a good nonprofit get into trouble is not fraud or mismanagement. It's a board that didn't know the corporation had to file a return.

The Short Answer: Which Annual Return Does Your Nonprofit File?

Under Internal Revenue Code §6033, almost every 501(c)(3) organization must file an annual information return in the "Form 990 series." Which form your corporation files depends on its size:

Form	Who Files It	What It Involves
Form 990-N (the "e-Postcard")	Gross receipts normally $50,000 or less	A short online notice: legal name, EIN, address, principal officer, website, and confirmation that receipts are under the limit. No financial statements.
Form 990-EZ	Gross receipts under $200,000 and total assets under $500,000 at year end	A shortened financial return: revenue, expenses, balance sheet, program accomplishments, officers and directors, plus required schedules.
Form 990	Gross receipts $200,000 or more, or total assets $500,000 or more	The full return: detailed finances, governance practices, compensation of officers, directors and key employees, and numerous schedules.
Form 990-PF	Private foundations, regardless of size	A separate return with excise tax on investment income and minimum distribution reporting.

A corporation that qualifies for the 990-N or 990-EZ may always choose to file a longer form instead. Some grantors and lenders ask for a full Form 990 even from small organizations.

What "Normally $50,000 or Less" Means

The 990-N test is based on gross receipts over time, not just the current year. In general, a corporation in existence for three years or more qualifies if its average annual gross receipts for the most recent three years are $50,000 or less. Newer organizations use special rules for their first years. "Gross receipts" means total money and property received before subtracting any expenses, including donations, grants, program fees, event ticket sales, and the gross sales price of donated items. A gala that brings in $60,000 and costs $40,000 counts as $60,000 of gross receipts, not $20,000.

Churches Are the Main Exception

Churches, their integrated auxiliaries, and conventions or associations of churches are not required to file a Form 990-series return. Most other Arizona 501(c)(3) nonprofit corporations, including schools, charities, ministries that are not churches, booster clubs, and foundations, must file every year. If you are unsure whether your organization qualifies as a church for IRS purposes, get advice before skipping a return.

When the Annual Return Is Due

Every Form 990, 990-EZ, 990-PF and 990-N is due on the 15th day of the 5th month after the end of the corporation's fiscal year. If that date falls on a Saturday, Sunday or legal holiday, the deadline moves to the next business day.

Fiscal Year Ends	Return Due	Extended Due Date (Form 8868)
December 31	May 15	November 15
June 30	November 15	May 15
September 30	February 15	August 15

Extensions. A corporation that files Form 990, 990-EZ, 990-PF or 990-T can get one automatic six-month extension by filing IRS Form 8868 on or before the original due date. An extension filed even one day late is no good, and penalties run from the original due date. There is no extension for the Form 990-N e-Postcard.

Your first return. The fiscal year is chosen when the corporation is organized and is stated in the Form 1023 or 1023-EZ application. The first return is due after the end of the first fiscal year, even if that year was only a few weeks long. If the corporation's exemption application is still pending with the IRS when the return is due, the corporation still files and checks the "application pending" box. Don't wait for the determination letter.

All Form 990-Series Returns Must Be Filed Electronically

Paper returns are no longer accepted. Form 990, 990-EZ, 990-PF and 990-T must be e-filed through IRS-authorized e-file software or a tax professional who e-files. The Form 990-N is filed online through the IRS website, and the person filing it must create a secure IRS login. If your treasurer "mails in the 990," it was not filed.

What Happens If the Return Is Late or Never Filed

1. Automatic Revocation of Tax-Exempt Status After Three Years

This is the consequence every officer and director must understand. Under IRC §6033(j), if a corporation fails to file its required annual return or e-Postcard for three consecutive years, its tax-exempt status is automatically revoked as of the due date of the third return. There is no warning letter required, no hearing, and no appeal. The IRS publishes the corporation's name on its public Auto-Revocation List.

This applies even to tiny organizations that only had to file the free, five-minute 990-N. Thousands of small Arizona charities have lost their exemption this way.

After revocation:

• Donations are no longer tax-deductible to donors, and the corporation is removed from the IRS Tax Exempt Organization Search database that donors and grantors check.
• The corporation may owe federal income tax on its income, and the Arizona Department of Revenue no longer treats it as exempt.
• Grants from foundations and government agencies usually stop, because most require current 501(c)(3) status.
• To get exemption back, the corporation must file a brand-new Form 1023 or 1023-EZ, pay the IRS user fee again, and in many cases ask for retroactive reinstatement, which requires showing reasonable cause.

2. Daily Late-Filing Penalties

Under IRC §6652(c), a corporation that files a Form 990, 990-EZ or 990-PF late, or files an incomplete return, pays a penalty for every day the failure continues. The amounts are adjusted for inflation each year. For returns filed in 2026 (covering 2025):

• Gross receipts of $1,309,500 or less: $25 per day, up to the lesser of $13,000 or 5% of the corporation's gross receipts for the year.
• Gross receipts over $1,309,500: $130 per day, up to $65,000.

An "incomplete" return is treated like a late return. Leaving out a required schedule, such as Schedule A (public charity status) or Schedule B (contributors), can trigger the same penalty. There is no dollar penalty for a late 990-N, but missing it three years in a row still causes automatic revocation.

3. Personal Penalties on the Responsible Officer

If the IRS sends a written demand to file and the return still isn't filed by the date in the demand, the IRS can assess a separate penalty against the person responsible for filing, currently $10 per day up to $6,500 per return. That penalty is assessed against the individual, not the corporation.

The IRS will usually waive late-filing penalties if the corporation shows reasonable cause, but "our volunteer treasurer moved away and nobody knew" is a weak argument. Build the deadline into the board's calendar.

Form 990-T: Tax on Unrelated Business Income

A 501(c)(3) corporation is exempt from tax on income from its charitable activities, but not on income from a regularly carried on trade or business unrelated to its exempt purpose. That income is called unrelated business taxable income (UBTI) and is taxed under IRC §511 at corporate income tax rates.

If the corporation has $1,000 or more of gross income from unrelated business activities in a year, it must file Form 990-T in addition to its regular 990-series return. Examples that can create UBTI include selling advertising in a newsletter or program, running a café or store that sells items unrelated to the mission, renting property that is financed with debt, and certain income from partnerships or LLCs the nonprofit invests in. Many fundraising activities are excluded, such as events run substantially by volunteers and the sale of donated goods, but the rules are technical.

Form 990-T is due the 15th day of the 5th month after year end, must be e-filed, and may require quarterly estimated tax payments. A 501(c)(3) organization's Form 990-T is also a public document. Arizona has its own version: an organization that files a federal Form 990-T must also file Arizona Form 99T with the Arizona Department of Revenue.

Employment Tax Returns If the Nonprofit Has Employees

Being a 501(c)(3) organization does not exempt a corporation from payroll taxes. If your nonprofit pays anyone as an employee, including an executive director, pastor, teacher or office manager, it has the same withholding and reporting duties as any other employer:

• Form 941 (quarterly) to report federal income tax withheld and Social Security and Medicare taxes, with deposits made electronically on the IRS schedule.
• Forms W-2 and W-3 to each employee and to the Social Security Administration by January 31.
• Form 940 (FUTA) is generally not required. 501(c)(3) organizations are exempt from federal unemployment tax under IRC §3306(c)(8). Arizona state unemployment and withholding rules are separate and should be reviewed with your payroll provider or CPA.

Officers and directors, pay close attention to this one. Income tax and the employee's share of Social Security and Medicare that the corporation withholds are "trust fund" taxes. If they are not paid to the IRS, IRC §6672 lets the IRS collect 100% of the unpaid amount personally from any officer, director or employee who was responsible for paying it and willfully failed to do so. The corporate "shield" does not protect you. The statute offers limited protection to unpaid, volunteer board members of tax-exempt organizations who serve in an honorary capacity, don't participate in day-to-day financial operations, and didn't know about the failure. Treasurers and officers who sign checks are the people most at risk.

Form 1099 Information Returns for Independent Contractors

Nonprofits that pay independent contractors, such as a bookkeeper, web designer, consultant, musician or speaker, must issue Form 1099-NEC to each one paid above the reporting threshold and file a copy with the IRS by January 31. For payments made in 2026 and later, the One Big Beautiful Bill Act raised the 1099-NEC and most 1099-MISC thresholds from $600 to $2,000 per payee per year, with inflation adjustments starting in 2027. Payments made in 2025 still used the $600 threshold.

Get a signed IRS Form W-9 from every contractor before you pay them. Rent paid to a landlord can also require a 1099-MISC.

Other IRS Forms Arizona Nonprofits Run Into

These forms are not filed every year, but officers should know when they apply:

• Form 8282 (Donee Information Return). If the corporation sells, trades or gives away donated property (other than cash and publicly traded securities) within three years after receiving it, and the donor claimed a deduction over $5,000 for it, the corporation must file Form 8282 within 125 days of the disposition. Officers are also often asked to sign Part V of the donor's Form 8283 acknowledging receipt of a large noncash gift.
• Form 8822-B (Change of Address or Responsible Party). The IRS must be told within 60 days when the corporation's "responsible party" changes. For a nonprofit that is usually the principal officer. Boards that rotate officers every year often forget this, and IRS notices then go to someone who left years ago.
• Form 4720 (Excise Taxes). Used to report and pay excise taxes, including the penalty taxes on "excess benefit transactions" under IRC §4958, when an insider receives unreasonable compensation or a sweetheart deal. The insider pays a 25% tax on the excess benefit, and an officer or director who knowingly approved it can owe a personal 10% tax, up to $20,000 per transaction.
• Form 5768 (Lobbying Election). An optional election under IRC §501(h) that gives a 501(c)(3) clear dollar limits on lobbying instead of the vague "no substantial part" test.

Your Form 990 Is a Public Document

Under IRC §6104, a 501(c)(3) corporation must make its three most recent annual returns, its Form 990-T, and its exemption application (Form 1023 and IRS correspondence) available for public inspection. If someone asks in person, copies must be provided immediately; written requests must be answered within 30 days. Posting the documents on the corporation's website satisfies the copy requirement. Failing to comply carries its own daily penalty.

Donor names and addresses on Schedule B are not public for most 501(c)(3) organizations, so the public copy should have those redacted. Everything else, including officer and director names and compensation, is visible to donors, grantors, journalists and watchdog websites. Many donors read your Form 990 before they write a check. Treat it as a public report card on your organization, not a tax chore.

What the Form 990 Asks About Your Board and Governance

Part VI of the full Form 990 asks direct questions about how the corporation is governed, and the answers are public. Among them:

• How many voting directors are there, and how many are independent?
• Does any officer or director have a family or business relationship with another?
• Does the corporation have a written conflict of interest policy, a whistleblower policy, and a document retention and destruction policy?
• Were minutes kept of board and committee meetings?
• How is executive compensation approved?
• Was a copy of the Form 990 provided to every voting member of the board before it was filed? The return must describe the process the board used to review it.

There's no law that requires these policies, but answering "No" to these questions tells the public and the IRS that your board isn't paying attention. Adopt the policies, keep minutes, and have the board actually review the return before it is filed.

Schedule A and the Public Support Test

Most 501(c)(3) corporations are classified as "public charities" because they receive broad financial support from the public. Schedule A, filed with Form 990 and 990-EZ, is where the corporation proves it. Beginning with its sixth year, a typical public charity must show that at least one-third of its total support over the most recent five years came from the general public, government units, and other public charities, or that it meets an alternate facts-and-circumstances test. A corporation funded mostly by one family or one donor can fail this test and be reclassified as a private foundation, which brings stricter rules and excise taxes. Whoever prepares your return must track this year after year.

Who Should Prepare Your Nonprofit's IRS Returns?

The answer depends on which return the corporation files and how complex its finances are.

Form 990-N: Your Treasurer or Principal Officer Can File It

The e-Postcard asks for basic information and takes a few minutes. A capable officer can file it directly on the IRS website at no cost. The key is making sure someone is assigned to do it every year. Note the filing in the board minutes and keep a printout of the IRS confirmation.

Form 990-EZ and Form 990: Hire a CPA Who Works with Nonprofits

For any corporation filing Form 990-EZ, Form 990, Form 990-PF or Form 990-T, I recommend hiring a certified public accountant (CPA), or an enrolled agent, who regularly prepares returns for tax-exempt organizations. Nonprofit returns are very different from individual or business tax returns. The preparer must handle functional expense allocation (program, management and fundraising), the public support calculation on Schedule A, contributor reporting on Schedule B, compensation disclosures, unrelated business income, and the governance questions. A preparer who does mostly individual 1040s may not know these rules.

When you interview a preparer, ask how many Form 990s they prepare each year, whether they e-file 990-series returns, and whether they will prepare the corporation's 1099s and 990-T if needed. Expect the fee to reflect the quality of your bookkeeping. Clean books cost less to report.

The Board Still Owns the Return

Hiring a CPA does not shift responsibility away from the corporation. An authorized officer signs the return under penalties of perjury, and the board is responsible for making sure it's filed. The officers' job is to:

• Keep accurate books all year, separating restricted and unrestricted funds and tracking program, administrative and fundraising expenses.
• Give the preparer the records early, well before the due date or extended due date.
• Circulate the draft return to every voting director before it is filed, and record the review in the minutes.
• Confirm that the return was actually e-filed and accepted, and keep the IRS acknowledgment.
• Post the public copy (with Schedule B donor information redacted) on the corporation's website.

When to Involve an Attorney

A CPA prepares the return. An attorney is the right professional when the return raises legal questions, such as whether an insider's compensation or a transaction with a director could be an excess benefit transaction, whether a new revenue activity creates unrelated business income or threatens exemption, whether the corporation's lobbying or political activity is permitted, adopting the governance policies the Form 990 asks about, amending the Articles of Incorporation or Bylaws, or seeking reinstatement after automatic revocation.

Don't Forget the Arizona Corporation Commission

This article covers IRS filings, but there's a separate state requirement that is just as easy to miss. Every Arizona nonprofit corporation must file an annual report with the Arizona Corporation Commission under A.R.S. §10-11622. A corporation that fails to file can be administratively dissolved by the Commission. As for the Arizona Department of Revenue, 501(c) organizations no longer file an annual Arizona information return (the old Arizona Form 99 or copies of their federal 990), but they must file Arizona Form 99T if they file a federal Form 990-T.

Annual IRS Compliance Checklist for Arizona Nonprofit Boards

• Know your fiscal year end and your Form 990 due date. Put it on the board calendar.
• Determine each year which return applies: 990-N, 990-EZ, 990 or 990-PF.
• Assign one named officer to be responsible for every filing.
• File Form 8868 before the due date if the return won't be ready.
• Review the draft return at a board meeting before filing, and note it in the minutes.
• File Form 990-T (and Arizona Form 99T) if unrelated business gross income is $1,000 or more.
• If you have employees, make payroll tax deposits on time and file Forms 941, W-2 and W-3.
• Collect W-9s and issue Forms 1099-NEC and 1099-MISC by January 31.
• File Form 8822-B within 60 days when the principal officer or address changes.
• Post your three most recent returns and your Form 1023 on your website.
• Check the IRS Tax Exempt Organization Search tool once a year to confirm your status is current.

Frequently Asked Questions

Does a nonprofit with no income have to file anything with the IRS?

Yes. A 501(c)(3) corporation with zero or very little income must still file the Form 990-N e-Postcard each year. Skipping it for three consecutive years causes automatic revocation of tax-exempt status, even if the corporation never received a dollar.

Our IRS application is still pending. Do we have to file a Form 990?

Yes. If the annual return comes due while the Form 1023 or 1023-EZ is pending, the corporation files the appropriate 990-series return and indicates the application is pending.

Can our volunteer treasurer prepare the Form 990?

A volunteer can file the 990-N. For Form 990-EZ, Form 990 or Form 990-T, it is legally permitted but rarely wise unless the volunteer is a CPA or enrolled agent experienced with exempt organizations. Errors and omissions are public and can cause penalties.

We just discovered we missed two years of returns. What should we do?

Act immediately. File the missing returns before the third deadline passes, so the corporation does not reach three consecutive missed years. Then request abatement of any penalties for reasonable cause. If three years have already been missed, check the IRS Auto-Revocation List and get professional help with reinstatement.

Can directors be personally liable for the nonprofit's IRS problems?

In certain situations, yes. The biggest risks are unpaid payroll trust fund taxes under IRC §6672, excise taxes on officers and directors who knowingly approve excess benefit transactions, and the daily penalty on the person responsible for filing after an IRS demand. Directors and officers insurance and good governance practices reduce the risk, but they don't replace filing on time.

Are churches required to file a Form 990?

No. Churches, conventions or associations of churches, and their integrated auxiliaries are exempt from the annual 990 filing requirement. They must still file payroll tax returns, 1099s, and Form 990-T if they have unrelated business income.

What is the penalty for filing Form 990 late?

For returns filed in 2026, $25 per day for organizations with gross receipts of $1,309,500 or less (capped at the lesser of $13,000 or 5% of gross receipts), and $130 per day for larger organizations (capped at $65,000). The amounts are adjusted for inflation each year.

Form Your Arizona Nonprofit Corporation the Right Way

Arizona attorneys Richard Keyt and his son, attorney and former CPA Richard C. Keyt, have formed 550+ Arizona nonprofit corporations that became 501(c)(3) tax-exempt organizations. Read our step-by-step guide on how to form an Arizona nonprofit corporation and see the 28 services we provide when we form an Arizona nonprofit corporation for a flat fee of $1,297.

Need tax-exempt status? Learn about our IRS Form 1023 Preparation Services and read IRS Form 1023: Eligibility, Instructions & Filing Guide and IRS Form 1023-EZ: Eligibility, Instructions & Filing Guide.

To hire us to form your Arizona nonprofit corporation, submit our nonprofit incorporation questionnaire, call Rick the father at 480-664-7478 or email rk@keytlaw.com, or call his son Ricky the former CPA at 480-664-7472 or email rck@keytlaw.com. You can also book a free office, phone or Zoom video consultation.

This article provides general information about federal tax filing requirements for Arizona nonprofit corporations as of October 2026 and is not legal or tax advice for any specific organization. Dollar thresholds and penalty amounts change and are adjusted for inflation. Consult a qualified professional about your organization's situation.

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