IRS Form 990-T

An exempt organization that receives $1,000 or more in gross income from a separate business is required to file an Exempt Organization Business Income Tax Return. Unrelated business revenue is typically defined as income from a regularly carried on trade or business that is not significantly related to the charitable, educational, or other purpose that is the foundation of the organization's exemption.

Purpose Of Form 990-T

  • Declare ancillary business revenue.
  • Calculate and submit the tax liability on unrelated business income.
  • Pay any prox tax obligations.
  • Request a refund of the income tax that a real estate investment trust (REIT) or regulated investment company (RIC) paid on an undistributed long-term capital gain.
  • Submit a credit request for any paid federal excise taxes or health insurance premiums for small employers.
  • Report reinsurance entities' unrelated business income tax.

Which Account Types Need To File A 990-T?

  1. Individual retirement accounts (IRAs), including Traditional IRAs
  2. Simplified employee pension IRAs (SEP IRAs)
  3. Savings incentive match plan for employees of small employers IRAs (SIMPLE IRAs)
  4. Roth IRAs
  5. Coverdell education savings accounts (ESAs)
  6. Archer medical savings accounts (Archer MSAs)
  7. Health savings accounts (HSAs)
  8. Solo 401(k)

Form 990-T Filing Norms

The instructions for the 2021 Form 990-T include a reminder that business lunches are currently eligible for a 100% deduction rather than the customary 50% deduction. As a result of an amendment to Section 274(n)(2) made by the Taxpayer Certainty and Disaster Relief Act of 2020, some business meal expenses from restaurants paid or incurred from January 1, 2021, through December 31, 2022, are now fully deductible. The interim compensation was meant to boost the restaurant sector's sales, which had been negatively impacted by the pandemic. The additional deduction does not apply to costs for meals that were not served by restaurants.

An organization must disclose the amount of its net operating loss (NOL) carryover from tax years prior to 2018 in Part IV, Line 4 of the 2021 Form 990-T. (i.e., the total of all pre-2018 NOLs not used to offset income in a tax year prior to 2021). The 2021 Form 990-T's Part I, Line 6 contains the deduction for pre-2018 NOL. Any NOL deduction reported in Part I, Line 6 should not be subtracted from the full amount of NOL carried forward to tax year 2021, which should be entered in Part IV, Line 4.

For companies to enter the amount of each post-2017 NOL carried over to the tax year for each trade or company that is segregated as required by Section 512(a), the IRS introduced Part IV, Line 5 to the 2021 Form 990-T. (6). The instructions state that even if a Schedule A for any particular trade or business is not included with the 2021 return, the NOL for each distinct trade or business performed after 2017 should be recorded. The entire available NOL for each distinct trade or business carried over to tax year 2021 must be recorded, just like pre-2018 NOLs reported in Part VI, Line 4, even if some of it is utilized to offset income for the year. Post-2017 segregated NOL deductions are still reported on the relevant Schedule A, Part II, Line 17.

Note: An electronic filing of the 2021 Form 990-T is required. In February 2021, this mandatory electronic filing requirement went into force.

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