Payment of Tax

Estimated tax. A tax-exempt organization must make estimated tax payments if it expects its tax (unrelated business income tax after certain adjustments) to be $500 or more. Estimated tax payments are generally due by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. If any due date falls on a Saturday, Sunday, or legal holiday, the payment is due on the next business day.

Any organization that fails to pay the proper estimated tax when due may be charged an underpayment penalty for the period of underpayment. Generally, to avoid the estimated tax penalty, the organization must make estimated tax payments that total 100% of the organization's current tax year liability. However, an organization can base its required estimated tax payments on 100% of the tax shown on its return for the preceding year (unless no tax is shown) if its taxable income for each of the 3 preceding tax years was less than $1 million. If an organization's taxable income for any of those years was $1 million or more, it can base only its first required installment payment on its last year's tax.

All tax-exempt organizations should use Form 990-W (Worksheet), Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations, to figure their estimated tax.

Tax due with Form 990-T. Any tax due with Form 990-T must be paid in full when the return is filed, but no later than the date the return is due (determined without extensions).

Tax Deposit Methods

An exempt organization must deposit its unrelated business income tax (including estimated tax) using one of the following methods.

Electronic deposits. Some organizations are required to electronically deposit all depository taxes under section 6302, including the unrelated business income tax, using the Electronic Federal Tax Payment System (EFTPS). If the organization is required to deposit electronically and does not do so, it may be subject to a 10% penalty. Organizations that are not required to make electronic deposits may voluntarily participate in EFTPS. To enroll in EFTPS, call 1-800-555-4477 or 1-800-945-8400. For general information about EFTPS, see section 11 of Publication 15, Circular E, Employer's Tax Guide, or call 1-800-829-1040.

Electronic deposit requirement. If an organization deposits more than $200,000 in depository taxes in a calendar year, it must electronically deposit all its depository tax liabilities for return periods beginning after the following calendar year. For example, an organization that deposited more than $200,000 in 1998 must deposit all its depository tax liabilities for return periods beginning in 2000 and later years.

Deposits with Form 8109. If the organization is not required to (or does not voluntarily) make electronic deposits, it must make its deposits with Form 8109, Federal Tax Deposit Coupon. The completed Form 8109 with the payment must be mailed or delivered to a qualified depositary for federal taxes or Federal Reserve Bank (FRB), as instructed on the coupon. Deposits should not be sent directly to the IRS. A penalty may be imposed if the deposits are sent to an IRS office rather than to an authorized depositary or FRB.

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