- April 23, 2024
Tax season can feel cumbersome, as the IRS expects its people to file their taxes on time. It can also be hectic for tax-exempt organizations and employers who have to file complex tax forms like Form 990. But luckily they have IRS Form 8868 as their safety net. This IRS Form offers a six-month extension for the taxpayers to gather all the required tax documents and to avoid late filing penalties.
Understanding Form 8868
IRS tax extension Form 8868 is used by non-profit organizations, charities, and non-profit groups to request an automatic 6-month time extension to file their tax information returns. These organizations need not provide their reason for filing Form 8868 for extension. They only have to submit this Form to the IRS by the due date, and this would offer them an automatic time extension for up to 6 months to file their returns.
Form 8868 is the automatic time extension form for filing the taxes of tax-exempt organizations only. Other organizations and individual taxpayers should not use this form to obtain extensions. The extension is to buy time for filing the returns only and does not buy additional time to pay the taxes owed.
Who Should File Form 8868?
A tax-exempt organization generally files Form 8868 to request the IRS to offer them an automatic six-month extension of the time period to file their returns. Also, the trustee of the nonprofit trust, who is required to file Form 1041-A or IRS Form 5227, should use Form 8868 to request the time extension to file those two returns.
Non-profit organizations, charities, and other tax-exempt groups generally use this IRS tax Form. Filing Form 8868 can extend the deadlines for the following tax Forms.
- IRS Form 990
- Form 990 EZ
- Form 8870
- Form 1041-A
- Form 5227
- Form 6069
- Form 990-T
- Form 4720
- Form 5220
IRS Form 8868 is not applicable to Form 990-N. Filing this tax Form within the due date offers six months of additional time to file the returns with the Internal Revenue Service. Failing to file this tax Form within the due date can result in a penalty of up to $53,000, depending on the organization’s financial activities.
Key Deadlines for Non-Profit Organizations
The due date for filing IRS Form 8868 depends on the end date of the tax-exempt organization’s accounting period. For organizations that follow the calendar tax year that ends on 31 December, Form 8868 would be due on 15 May.
Similarly, for organizations that follow a fiscal tax year, then the form should be filed on the 15th day of the fifth month after their tax year ends.
If the due date falls on a federal holiday or a weekend, then the deadline to file Form 8868 will be extended to the next working day.
Why Non-Profits Need Extensions
Tax-exempt organizations such as non-profits can request a tax extension by making use of the IRS Form 8868. This buys them additional time to apply for an additional six-month tax extension to file the returns. The organizations should, however, demonstrate reasonable cause for filing the additional tax extension. non-profit organizations can also be busy and understaffed, and thus, getting a tax extension can give them the time to ensure that their tax return is in full compliance. Other reasons why non-profits file for tax extensions are as follows.
- Dealing with incomplete financial records.
- Non-profits rely on funding from multiple sources, including grants and donations, and thus, tracking these financial flows takes effort and time.
- Unexpected delays in getting tax documents from third pirates such as banks and brokers.
- Changes in board leadership can disrupt their financial management.
When non-profits file tax extensions for these reasons, it helps them avoid late-filing penalties and buys them more time to present their financial documents to the IRS. This also avoids the last-minute rush and ensures to avoid mistakes. They can use this Form as a tool to meet IRS filing requirements while avoiding unwanted financial penalties and audit notices.
Navigating the Form 8868 Filing Process with Tax2efile
Non-profit organizations, tax-exempt institutions, and charities make use of IRS Form 8868 to appeal for an automatic 6-month filing extension to file their tax-exempt return. With Tax2efile, tax filers can simply E-file the return and submit their 990 extension Form 8868 within a few minutes.
Apart from non-profits, trustees of a trust, who are required to file Form 1041-A or Form 5227, can use this extension Form 8868 to get an extension for the tax returns. If the completed IRS Form 8868 is submitted properly, then the IRS grants them an automatic 6-month extension to file returns.
The tax filer is required to E-file and submit Form 8868 with the IRS by May 15th. All extension forms should be submitted by the deadline of the original tax Form for which they are requesting an extension. Filing this tax Form with Tax2efile is easy and simple and it incurs the following steps.
- The users should first create an account with the IRS for free and log on to their dashboard.
- The next step is to enter the information of the organization, such as the name of the organization, SSN and EIN, and address of the non-profit.
- The third step is to select the type of Form 990-N, for which they are applying for an 8868 tax extension.
- Then they have to select the tax year period of the organization
- The next step is to review the application and fix any errors in the tax Form.
- The last step is to pay the required taxes and submit the tax Form to the IRS.
E-filing the tax Form is always a wise option to file Form 8868. E-filing is a secure process and is also simple and quick to complete the entire filing. Those who choose not to e-file the tax returns can also send the form to the IRS through mail, which is a time-consuming process. The advantages of choosing to e-file Form 8868 with the IRS are as follows.
- Integration of accounting software with Tax2efile helps users to file e-file 8868 Forms through a single account
- Registering with Tax2efile is easy, hassle-free, and also has the lowest prices in the industry.
- The portal has automatic error-checking options that avoid all chances of errors and rejections.
- They also have a dedicated customer support team who are ready round the clock over call, email, and live chat to help with tax-related questions.
Benefits and Consequences of Filing Form 8868
Charities and non-profit organizations can make use of Form 8868 to report their financial activities with the IRS each year. Directors, managers, and administrators of tax-exempt organizations can request tax extensions with the IRS. There are two types of extensions that can be obtained through Form 8868.
Previously, Form 8868 avails an automatic three-month tax extension for corporations filing part I of Form 8868. If the tax filer properly completes and files extension Form by the deadline, the IRS grants an automatic extension for three months to file the returns. They can file part II of Form 8868 to get an additional and non-automatic three-month extension to file returns. Tax-exempt organizations were not allowed to apply for both the automatic and additional tax extensions at the same time. They have to apply part I of the Form for automatic extension and part II of the Form for additional extension.
Starting in the year 2016 tax year, the IRS has combined this 3-month automatic and non-automatic extension into a single 6-month automatic extension of Form 8868. Form 8868 cannot be used to extend the due date of the Form 990-N. The organization is allowed only an extension of six months for the tax return of the tax year.
Legal and Compliance Considerations
Charitable non-profits must submit Form 990 to the IRS by the 15th day of the 5th month after fiscal year closure. Non-compliant organizations can seek a 6-month extension by submitting to the IRS. Failing to file these tax Forms can result in serious consequences for the non-profit entity.
The IRS can levy huge fines, which amount to $20 a day, for a return that is filed late. This holds good for organizations whose gross receipts equate to less than $1,00,000 for the fiscal tax year. The maximum fine is up to 5% of the gross receipts of the organization, or $10,000, whichever is less. Organizations whose gross receipts are greater than $1,000,000 can suffer steeper fines. The penalty might increase to about $100 per day, which can go up to $50,000.
The IRS Tax Form 990 is an annual tax return form for non-profit organizations that has 12 pages and 12 parts. Tax-exempt organizations use this Form to report their income, expenditures, and other activities to the IRS. Organizations struggling with Form filing can opt for tax extension Form 8868, granting 6 months extra for IRS submission. Tax filing organizations like Tax2efile help non-profits to file this Form with the IRS pertinently, within the deadline, to avoid late filing penalties.
