How Do I File an Extension for Form 990-T?

Tax-exempt organizations use Form 990-T, Exempt Organization Business Income Tax Return, to report and pay taxes on income from business activities not directly related to their exempt purpose. This filing is required when an organization has $1,000 or more in gross income from such activities. If meeting the Form 990-T filing deadline is a challenge, a formal extension request can be filed to avoid potential penalties.

Information and Documentation for the Extension

To request more time, an organization must use Form 8868, Application for Extension of Time To File an Exempt Organization Return. For most organizations, this form provides an automatic six-month extension for filing Form 990-T. For trusts, the initial automatic extension is for three months, and a trust may request an additional three-month extension by filing a second Form 8868, though this is not automatically granted. Before completing the application, the organization’s legal name, mailing address, and Employer Identification Number (EIN) must be gathered.

On Form 8868, you must enter the return code for Form 990-T, which is ’09’, and specify the organization’s tax year. A key step is calculating the tentative tax liability, which is an estimate of the total tax the organization expects to owe for the year. After determining the tentative tax, you must report any payments or credits already made, such as quarterly estimated tax payments. The difference is the balance due, which must be entered on the form and calculated as accurately as possible.

The Filing Process for the Extension Request

The completed Form 8868 must be submitted to the IRS by the original due date of the Form 990-T. For most organizations, this is the 15th day of the 5th month after the end of their tax year. Filing the extension application on time is a requirement for it to be granted.

Organizations have two methods for submitting Form 8868: mail or electronic filing. A paper copy must be sent to the specific IRS address designated for the organization’s location. Organizations can also file electronically through an IRS-approved e-file provider.

If Form 8868 is filled out correctly and filed by the deadline, the automatic extension is granted. The IRS does not send a confirmation notice for these automatic extensions. The organization should retain a copy of the filed Form 8868 and proof of submission for its records.

Paying Tax with an Extension

A primary rule of the extension process is that an extension to file is not an extension to pay. Even though the organization has additional time to submit Form 990-T, the tax liability is still due by the original filing deadline.

The estimated tax liability calculated on Form 8868 must be paid in full by the original due date of the return. If filing a paper Form 8868, a check or money order for the balance due can be mailed along with the extension application.

For electronic payments, the Electronic Federal Tax Payment System (EFTPS) is the primary method used by the IRS. If the tax is not paid on time, the IRS will assess interest on the unpaid balance. A failure-to-pay penalty may also apply, even if a valid extension to file was secured.