Hey there, fellow CPA nerds! We’ve got a question that might have crossed your mind while crunching numbers: Do nonprofits in Michigan have to file a tax return since they don’t owe tax? Well, the answer might surprise you, but it’s a resounding yes! So, grab your pocket protectors, and let’s dive into the fascinating world of filing a nonprofit tax return in the Wolverine State.

Filing Your Nonprofit Tax Return

Nonprofits in Michigan, like everywhere else, are indeed required to file tax returns even if they don’t owe taxes. The reason behind this peculiar rule? Transparency, accountability, and a touch of bureaucracy. While many will see this as having to file a tax return, it’s actually considered an information return that details financial information covering statements of revenue and balance sheets.

For those trying to find out what forms to use, Form 990-N is used for small tax-exempt organizations with annual gross receipts of less than $50,000. Nonprofit organizations with gross receipts less than $200K and total assets less than $500K can file Form 990-EZ. Nonprofit organizations that cannot file Form 990-N or 990-EZ will file Form 990.

Meet the 990-Series Forms

Now, let’s go more in-depth on those 990-series forms. In the world of filing a nonprofit tax return, the 990-series is like the Avengers of tax documentation, and each form has its own superpowers.

  • Form 990-N (e-Postcard): This is for the tiniest nonprofits with gross receipts under $50,000. It’s like the Ant-Man of the series – small but mighty.
  • Form 990-EZ: For organizations with receipts between $50,000 and $200,000. Think of it as the Hawkeye – it gets the job done without all the flash.
  • Form 990: The big kahuna. For organizations with receipts over $200,000 or total assets over $500,000. This is Iron Man’s suit – complex and high-tech.
  • Form 990-PF: Exclusively for private foundations. It’s like the Black Widow – mysterious and secretive.
  • Form 990-T: When nonprofits unexpectedly find themselves with taxable income, this is their Captain America shield – it protects them from the IRS’s tax hammer.

Why Filing Form 990 Matters

You might wonder why these nonprofits have to go through the trouble of filing these forms when they don’t owe taxes. Well, there are several reasons, and they all boil down to ensuring transparency and accountability in the nonprofit sector.

Donor Confidence: Donors, whether they’re individuals or foundations, want to know where their hard-earned dollars are going. Filing these forms helps nonprofits showcase their financial health and integrity, which in turn attracts more funding.

IRS Oversight: The IRS uses these forms to keep tabs on nonprofits and make sure they’re staying true to their charitable mission. It’s their way of preventing organizations from going rogue and using their tax-exempt status for personal gain.

Public Information: These forms are public records, which means anyone (yes, even you, dear reader) can access them. It’s like a nonprofit’s report card for the world to see, helping to build trust and transparency.

Accountability: Nonprofits in Michigan, like elsewhere, must be accountable for their actions and finances. Filing these forms helps the state government keep a watchful eye on these organizations.

Penalties for Non-Filing: If nonprofits don’t file the required forms, they can face penalties and the loss of their tax-exempt status. So, it’s not a game you want to play with the IRS.

Tax Deadline Extensions and How to Get Them

What’s the Quirk in Michigan?

Now, here’s where Michigan throws in a little quirk of its own. The state requires nonprofits to file an additional form known as the Michigan Nonprofit Corporation Annual Report (Form 519), apart from the federal 990-series forms.

The Form 519 isn’t your average tax return; it’s more like a friendly update to let the state know you’re still in business. It’s a short and sweet document that includes basic information about the nonprofit, like its name, address, officers, and a statement confirming its nonprofit status. Think of it as a postcard from your nonprofit to the Michigan Department of Licensing and Regulatory Affairs (LARA). The quirky part? If you forget to send this friendly postcard, your nonprofit could face dissolution by LARA.

Planning Your Next Steps With CPA Nerds

So, there you have it, fellow CPA nerds – nonprofits in Michigan do have to file tax returns, even if they don’t owe taxes. With such busy schedules, it’s easy to see how nonprofit workers could benefit from the assistance of knowledgeable CPAs so they can focus on their core missions. If you’re in need of any extra guidance, reach out to CPA Nerds, and be secure in the knowledge that your financial affairs are in order and meeting obligations as responsible stewards of public trust. Call CPA Nerds at (586) 468-0200 to start a conversation.

Primary Image Source: Envato Elements