Tax Extensions for Charities and Non-Profits: What You Need to Know

• admin
• January 28, 2025
• 6 min read

For charities and non-profit organizations, tax compliance is just as important as it is for for-profit businesses. While tax-exempt organizations don’t typically pay federal income tax, they still have annual filing obligations with the IRS. Missing deadlines or filing incomplete information can lead to penalties and put an organization’s tax-exempt status at risk. Fortunately, just like individuals and businesses, non-profits can file for a tax extension to get extra time to submit their annual returns.

Why Tax-Exempt Organizations Need to File

Even though non-profits operate for the public good, they are still required to report their financial activities to the IRS. This is done primarily through the following tax forms:

• Form 990 – Required for most tax-exempt organizations, detailing revenue, expenses, governance, and program accomplishments.
• Form 990-EZ – A simplified version of Form 990 for smaller organizations with gross receipts below $200,000 and assets below $500,000.
• Form 990-N (e-Postcard) – For very small non-profits with annual gross receipts of $50,000 or less.
• Form 990-PF – Specifically for private foundations, which must provide detailed reporting on grants and distributions.

These filings ensure transparency, maintain compliance with IRS regulations, and provide the public with insight into how a non-profit utilizes its resources. Failing to file on time can result in financial penalties and, if left unaddressed, loss of tax-exempt status.

How to Request a Tax Extension for a Non-Profit

The IRS understands that gathering financial data, obtaining board approvals, and finalizing reports can take time. That’s why non-profits can request an extension by filing Form 8868: Application for Automatic Extension of Time To File an Exempt Organization Return. This form grants an automatic six-month extension, providing much-needed flexibility for organizations that need more time to compile their financial information.

Steps to File Form 8868

1. Determine Eligibility: Almost all tax-exempt organizations required to file Forms 990, 990-EZ, 990-PF, or 990-T (for unrelated business income tax) are eligible for an extension. However, Form 990-N filers do not need to request an extension, as they simply need to submit their e-Postcard within the original deadline.
2. File Electronically or By Mail: The IRS encourages e-filing Form 8868 for quicker processing. Paper forms can be mailed but may take longer to be recorded.
3. Submit Before the Deadline: Form 8868 must be filed by the original return due date. For most non-profits, this is the 15th day of the 5th month after the organization’s fiscal year ends. For calendar-year organizations, the typical deadline is May 15.
4. No Explanation Required: Unlike some other tax extensions, the IRS does not require an explanation for why an organization needs more time. The extension is granted automatically upon proper filing.

Important Considerations for Non-Profit Extensions

While a tax extension provides extra time to file, it does not extend the time to pay taxes due. If a non-profit owes unrelated business income tax (UBIT), estimated payments must still be made by the original due date to avoid penalties and interest.

Additionally, an extension does not exempt an organization from state tax filing deadlines. Some states automatically grant extensions when a federal extension is filed, while others require a separate state-level request.

Consequences of Not Filing on Time

Failing to file Form 990 or requesting an extension can lead to significant consequences:

• Late Fees and Penalties: Organizations that do not file their 990 forms on time can face penalties of $20 per day for smaller organizations (gross receipts under $1 million) and $110 per day for larger organizations (gross receipts over $1 million), with a maximum penalty of $56,000.
• Loss of Tax-Exempt Status: If an organization fails to file its Form 990 for three consecutive years, the IRS will automatically revoke its tax-exempt status. To regain it, the organization must go through the complex process of reapplying, which can take months and require additional fees.
• Loss of Public Trust: Many donors and grant-making organizations review 990 filings before committing to funding. Late or missing filings can damage a non-profit’s reputation and credibility.

Best Practices for Non-Profit Tax Compliance

To avoid unnecessary penalties and administrative headaches, non-profits should implement the following best practices:

1. Plan Ahead: Start gathering financial documents and preparing the 990 form well before the deadline to avoid last-minute complications.
2. Consult a Tax Professional: Non-profit tax rules can be complex, and seeking guidance from an accountant or tax advisor ensures accuracy and compliance.
3. Use Accounting Software: Modern accounting solutions tailored for non-profits can simplify record-keeping and generate reports that streamline tax filing.
4. Monitor Deadlines: Keep track of federal and state deadlines to ensure timely filing and avoid penalties.
5. Consider Fiscal Year Differences: Non-profits that do not follow a calendar-year accounting system should carefully determine their specific filing deadlines based on their fiscal year-end date.

Conclusion

Filing a tax extension for a non-profit is a straightforward process that provides valuable time to ensure accuracy and compliance. By submitting Form 8868, organizations can avoid unnecessary penalties, maintain their tax-exempt status, and continue their mission without administrative distractions. However, non-profits should remember that while extensions provide extra time to file, they do not extend payment deadlines for any taxes owed.

With careful planning, proper documentation, and timely filing, charities and non-profits can navigate tax season smoothly and focus on what matters most—serving their communities and making a meaningful impact.