5 Common Errors to Avoid in a 990 Return: A Quick Guide
Understand the possible reasons for rejections and make sure to eliminate them on your 990 returns
Accurate 990 filing
is a crucial obligation for tax-exempt organizations in order to ensure compliance with IRS regulations and maintain their tax-exempt status. However, errors in the filing process can lead to rejection, delays, or even jeopardize the organization’s tax-exempt status. By understanding these hitches and how to rectify them, organizations can navigate the filing process smoothly, ensuring adherence to IRS requirements.
In this quick guide, we’ll highlight six common errors to avoid when completing your 990 return.
Name Control and EIN Mismatch
IRS Error Code: R0000–922–01 (or) TEGE-922
IRS Rejection Message:
The business name, EIN, and the name control on the return filed didn’t match the name control on the IRS database.
Error Description:
Your name control and the EIN might be mismatched with the data on the IRS e-file database. So, first of all, what is a name control?
Name Control is a four-character identifier derived from the organization’s name. The IRS assigns it when the organization requests an Employer Identification Number (EIN).
Typically, this type of error occurs when you enter the organization’s name or EIN incorrectly.
Steps To Resolve it:
- Check the organization’s name and Employer Identification Number (EIN) entered on the form.
- Review the IRS rules in the Business Name Control matrix.
Tax Period End Date Mismatch
IRS Error Codes: F990–901–02, F990–911–04 (or) F990PF-901–02
IRS Rejection Message:
If the “Final Return” or “Initial Return” checkboxes are not checked, then in the Return Header, the tax period end date must match data in the e-file database.
Error Description:
The tax period you’ve mentioned on your 990 return might be incorrect. Generally, the tax period mentioned on a 990 form shouldn’t be different from the previous year unless the organization files an initial or final return. Otherwise, the IRS will reject the return for the incorrect tax period.
How To Resolve it:
- Double-check the tax period you entered and correct it if necessary. You can verify the end date of your organization’s accounting period in the IRS determination letter.
- If you wish to change your organization’s accounting period, you can follow the guidelines mentioned here.
Incorrect E-filing Tax Year
IRS Error Code: R0000–004–01
IRS Rejection Message:
‘ReturnTypeCd’ (specified in the Return Header) and the return version (specified by the ‘return version’ attribute of the ‘Return’ element) of the return must match the return type and the version supported by the Modernized e-File system.
Error Description:
The tax year mentioned might be incorrect or not applicable. The IRS accepts 990 filings for the current and 2 prior years. If the entered year does not apply to the constraint or you entered an incorrect year, you will be subjected to this error.
How To Resolve it:
- Ensure that you have entered the applicable tax year for e-filing.
- If you want to file your forms that are older than 3 years, then you can paper file your returns to the IRS.
Organization Type Mismatch
IRS Error Codes: F990–912–01 (or) F990–913–01
IRS Rejection Message:
The organization type specified in the return didn’t match the data in the IRS e-file database.
Error Description:
Generally, the IRS will categorize an organization as a public charity or a private foundation under a particular IRC section based on the information provided on Form 1023 or 1024. For reassurance, the IRS requires you to mention your organization’s type as classified in the determination letter sent by them. If you mention an incorrect organization type on your 990 return, the IRS will reject the return.
How To Resolve it:
Refer to your organization’s type in the IRS determination letter, mention the right type of your organization, and transmit it to the IRS.
Organizations Not Recognized as Tax-Exempt
IRS Error Codes: F990–906–01 and F990–902–01
IRS Rejection Message:
The organization has not been recognized as tax-exempt by the IRS. Only exempt organizations can file Form 990.
Error Description:
This error can occur in two scenarios. Either you might have filed a 990 return for an organization that hasn’t applied for tax-exempt status yet or submitted a 1023/1024 but is awaiting IRS approval.
How To Resolve it:
- If your organization still needs to file Form 1023 to apply for tax-exempt status or waiting to acquire the approval, be sure to check the ‘Application pending’ field in the 990 Form.
- If you haven’t filed the required 990 return for three consecutive years, the IRS might have revoked your tax-exempt status. In this case, you must re-instate the tax-exempt status.
Tax990 is an IRS-authorized e-provider that incorporates the Internal Audit Check, a comprehensive feature to look after these errors. With this feature, the basic errors are spotted and resolved there on the same page. Furthermore, if the IRS rejects your return for any reason, you can fix the errors and retransmit it for free.
Conclusion
Steering through the complexities of Form 990 filing demands attention to detail and adherence to IRS guidelines. Thorough review, adherence to IRS rules, and timely correction of errors are key to successful Form 990 filing, which in turn safeguards your organization’s tax-exempt status and ensures smooth operations in the long run.
