In my last blog post, I talked about a threshold level for the requirement of a tax exempt entity to file Form 1023, (Application for Recognition of Exemption under Section 501(c)(3)). Here is some additional information about small social clubs and filing requirements.
As you may recall from some of our previous blogs, the Form 990-N became a filing requirement for smaller organizations several years ago. Prior to that requirement, any nonprofit organization with less than $25,000 in annual gross receipts did not have an annual filing requirement. That rule changed with the 990-N which requires that even these small organizations must file (note that there are exceptions for certain organizations such as churches).
Small social club organizations (for example, a softball league) fall under Section 501(c)(7) of the Internal Revenue Code. 501(c)(7) organizations include social and recreation clubs, organized for pleasure, recreation, and other similar nonprofitable purposes. If a social clubs chooses to be recognized officially as a tax exempt entity, they must file Form 1024 (Application for Recognition of Exemption Under Section 501(a)). However, filing this 1024 application is not required- it is optional.
The important point here is that whether or not a small organization, such as a social club, chooses to file Form 1024, the organization is still REQUIRED to file the Form 990-N at a minimum (unless it meets one of the exceptions, such as being a church). This is also true for a small 501(c)(3) organization that has less than $5,000 in gross receipts. As pointed out in my last blog on this issue, that small 501(c)(3) is not required to file a Form 1023 for application of tax exempt status. But as I’m pointing out in this blog post, that small 501(c)(3) organization is still required to file the Form 990-N at a minimum. When I say “at a minimum”, this means that if you have less than $50,000 in gross income in 2010, you file a Form 990-N. If you have more than $50,000 in gross income in 2010, you are required to file either the Form 990-EZ or the Form 990.
What if your social club does not file a 990-N? If you go three years without filing, the IRS will treat your organization as a taxable entity.
To file a 990-N, go here
For more information on Forms 990 and Tax Exempt Organization Accounting, feel free to contact a Henry+Horne tax professional. Or check out the wide variety of tax services we can provide to you to make your life easier.
By Colette Kamps, CPA