What Is Form 990-EZ?
Form 990-EZ, officially known as the "Short Form Return of Organization Exempt From Income Tax," is an annual information return filed with the Internal Revenue Service (IRS) by certain small and medium-sized non-profit organizations. It falls under the broader category of Non-profit Taxation and is a key component of an exempt organization's compliance obligations. This form provides the IRS and the public with essential financial and operational information, enabling transparency into the organization's activities and ensuring it maintains its tax-exempt status.29
Organizations generally qualify to file Form 990-EZ if their annual gross receipts are less than $200,000 and their total assets at the end of the tax year are less than $500,000.27, 28 It serves as a simplified alternative to the more comprehensive Form 990 for larger non-profits, reducing the reporting burden for smaller entities while still providing critical data.25, 26
History and Origin
The concept of requiring tax-exempt organizations to file informational returns dates back decades, evolving with changes in the U.S. tax code and the growth of the non-profit sector. The broader Form 990, of which Form 990-EZ is a short version, was first introduced for the tax year ending in 1941.24 Initially a two-page document, it expanded over time to include more detailed financial and operational information.23
Form 990-EZ specifically emerged as a simplified option in 1989.22 Its introduction reflected an understanding that smaller non-profit organizations might struggle with the extensive reporting requirements of the full Form 990, yet still needed a mechanism for accountability and disclosure. This streamlined form has since remained a vital tool for the IRS to monitor the activities of these smaller tax-exempt entities and for the public to access their financial data.
Key Takeaways
- Eligibility Thresholds: Form 990-EZ is primarily for tax-exempt organizations with annual gross receipts under $200,000 and total assets under $500,000.21
- Public Disclosure: Information reported on Form 990-EZ is generally available for public inspection, promoting transparency in the non-profit sector.20
- Compliance Requirement: Filing Form 990-EZ annually is mandatory for eligible organizations to maintain their tax-exempt status.19
- Simplified Reporting: It offers a more abbreviated reporting format compared to the full Form 990, easing the burden on smaller organizations.18
- Electronic Filing: As of tax years ending July 31, 2021, and onwards, Form 990-EZ must be filed electronically with the IRS.17
Interpreting the Form 990-EZ
Form 990-EZ provides a snapshot of a non-profit organization's financial health and activities. Key sections include a summary of revenue, expenses, and changes in net assets, as well as a simplified balance sheet.16 Users of the form, such as potential donors, grantmakers, or regulatory bodies, can interpret the reported data to assess the organization's financial stability, its dedication of resources to program services, and its adherence to its stated mission.
For instance, reviewing the ratio of program service expenses to total expenses can offer insight into how much of an organization's resources are directly used for its charitable mission, as opposed to administrative or fundraising costs.15 The balance sheet section outlines assets and liabilities, helping evaluate the organization's overall financial position.14 This financial statements information is crucial for understanding an organization's operational efficiency and its ability to sustain its programs.
Hypothetical Example
Consider "Hope for Tomorrow," a small non-profit organization focused on providing educational supplies to underprivileged children in a local community. For their fiscal year ending December 31, 2024, Hope for Tomorrow had $150,000 in gross receipts, primarily from individual donations and a small grant. Their total assets at year-end amounted to $100,000.
Because their gross receipts were below $200,000 and total assets were below $500,000, Hope for Tomorrow is eligible and required to file Form 990-EZ. On the form, they would report their total contributions received, their program service revenue (if any), and other income. Their expenses would be categorized, including salaries, occupancy costs, and most importantly, grants paid for educational supplies. The form would also detail their assets (cash, equipment) and liabilities (accounts payable) on the balance sheet section. This filing allows the IRS to verify their continued tax-exempt status and provides public access to their financial activities.
Practical Applications
Form 990-EZ serves several crucial practical applications in the non-profit and regulatory landscape. Primarily, it is the mechanism through which eligible exempt organizations fulfill their annual reporting requirements to the IRS. Failure to file can result in penalties and even automatic revocation of tax-exempt status.13
Beyond federal compliance, the data within Form 990-EZ is vital for transparency and public accountability. Donors often use publicly available 990-EZ forms to research organizations before making contributions, evaluating their financial health and how funds are spent.12 Grantmaking foundations also frequently review these forms as part of their due diligence process when considering funding applications. Furthermore, state charity regulators often rely on the federal Form 990-EZ to satisfy their own state-level reporting requirements, streamlining the process for smaller non-profits.11 The IRS mandates that non-profits make their Forms 990-series returns available for public inspection, underscoring their commitment to transparency.10
Limitations and Criticisms
While Form 990-EZ simplifies the reporting requirements for smaller non-profit organizations, its simplified nature also presents certain limitations and has drawn some criticisms. Because it is a "short form," it does not require the same level of detailed disclosure as the full Form 990. For instance, the statement of functional expenses, which breaks down expenses by program service, management and general, and fundraising, is less detailed on the Form 990-EZ. This can make it harder for the public or external analysts to get a granular understanding of how funds are truly allocated.
Critics argue that this reduced detail might hinder full transparency, particularly for organizations that operate close to the $200,000 gross receipts threshold. While sufficient for basic compliance, it may not always provide enough information for a comprehensive auditing review or in-depth evaluation by sophisticated donors seeking precise expenditure breakdowns. Nevertheless, the form remains a balance between regulatory oversight and minimizing the administrative burden on smaller entities, allowing them to focus more resources on their exempt purpose rather than extensive paperwork.9
Form 990-EZ vs. Form 990
The primary distinction between Form 990-EZ and Form 990 lies in the size and financial activity of the filing organization. Form 990-EZ is a shorter, more simplified version designed for small to medium-sized exempt organizations. To qualify for Form 990-EZ, an organization must have gross receipts less than $200,000 and total assets less than $500,000 at the end of its tax year.8
In contrast, the full Form 990 is required for organizations with gross receipts of $200,000 or more, or total assets of $500,000 or more.7 The full Form 990 is significantly more detailed, requiring extensive information on governance, compensation of officers and key employees, detailed program service accomplishments, and a comprehensive statement of functional expenses. The confusion often arises when an organization's financial activity fluctuates, potentially requiring a shift between filing the EZ form and the full form, or when misunderstanding the specific thresholds for each. Generally, private foundations, regardless of size, must file Form 990-PF, a different variant of the 990 series.6
FAQs
What is the purpose of Form 990-EZ?
The purpose of Form 990-EZ is to provide the Internal Revenue Service (IRS) and the public with information about the finances and operations of smaller tax-exempt status organizations. This ensures accountability and helps maintain the organization's non-profit status.5
Who is required to file Form 990-EZ?
Generally, tax-exempt organizations (excluding private foundations) with gross receipts less than $200,000 and total assets less than $500,000 at the end of their tax year are required to file Form 990-EZ.4
What information is included in Form 990-EZ?
Form 990-EZ includes a summary of revenue (like contributions and program service revenue), expenses (such as salaries and grants), and changes in net assets. It also contains a simplified balance sheet and information on program service accomplishments.3
Is Form 990-EZ available to the public?
Yes, information on Form 990-EZ is generally available for public inspection. This promotes transparency and allows donors and other stakeholders to review the financial health and activities of the organization.2
What happens if an organization fails to file Form 990-EZ?
Failure to file Form 990-EZ or filing late can result in penalties imposed by the IRS. Repeated failure to file can lead to the automatic revocation of an organization's tax-exempt status.1