Is E-Filing in Your Organization's Future?

Which tax-exempt organizations are required to file returns electronically?

In January 2005, IRS released temporary regulations that require certain tax-exempt organizations to file annual exempt organization returns electronically beginning in 2006.

For returns due on or after December 31, 2006, the regulations require tax-exempt organizations with total assets of $10 million or more ($100 million in 2005), who file at least 250 returns annually. to file Forms 990 electronically. In addition, private foundations and charitable trusts will be required to file Forms 990-PF electronically regardless of their asset size, if they file at least 250 returns annually.

The electronic filing requirements apply only to entities that file at least 250 returns, including income tax, excise tax, employment tax, and information returns, during a calendar year. All original returns filed by a tax-exempt organization during the calendar year are counted. Corrected or amended returns are not counted.

Example: If a tax-exempt organization that meets the total assets criteria has 245 employees, it would be deemed to file 250 returns because each Form W-2 and quarterly Form 941 is considered a separate return; therefore, the organization in this example files a total of 250 returns (245 W-2's, four 941's, and one Form 990.)

In addition, the controlled group provisions that apply to taxable corporations do not apply to tax-exempt organizations in this context. Thus, the 250 return threshold is determined by reporting entity only.

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