Tax-exemption for Schools - An Overview

  • If an organization is organized and operated exclusively for educational purposes, it is eligible for obtaining federal tax exemption from the IRS. And this includes Schools as well.
  • The Schools and other educational organizations that obtained tax exemption from the IRS aren’t subjected to federal income taxes.

Application for Tax Exemption

  • In order to be classified as tax-exempt by the IRS, the Schools are required to file Form 1023.
  • Upon filing, the schools will be provided with an exemption from federal income taxes under the IRC section 501(c)(3).

Form 990 Filing Requirements for Schools

  • The Schools that obtained federal tax exemption must file 990 Series Forms annually to report their financial information, activities, and certain other information required by the IRS.
  • The type of form that schools need to file depends upon their financial status,
  • Form 990-N - Schools with gross receipts ≤ $50,000
  • Form 990-EZ - Schools with gross receipts < $200,000 and assets < $500,000
  • Form 990 - Schools with gross receipts ≥ $200,000 or assets ≥ $500,000

Deadline to file Form 990

Penalties and Automatic Revocation

  • If a tax-exempt School fails to file Form 990 within the deadline, it will be subjected to penalties from the IRS. The penalty amount depends on the gross receipts of Schools.
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  • Also, Schools that fail to file 990 forms for 3 consecutive years may have their tax-exempt status revoked by the IRS.

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