F990EZ-113-02: Final return must show zero total assets

What this rejection means

You checked "Final return/terminated" in Item B of Form 990-EZ. A final return must show zero total assets at the end of the year on Part II, line 25, column (B). Yours showed an amount.

IRS business rule F990EZ-113-02: If Form 990-EZ, Item B, "Final return/terminated" checkbox is checked, then "Total Assets" (End of Year) Line 25(B) must be a value of zero.

The return was rejected. As filed, the IRS will not treat it as the organization's final return.

Why it happens

• Assets were still on hand at the end of the period. For example, money remained in the bank, or property had not yet been transferred.
• The box was checked by mistake. The Form 990-EZ instructions say to check it only if the organization has terminated its existence, or has ceased to be a section 501(a) or 527 organization, and is filing its final return as an exempt organization or 4947(a)(1) trust. A change of officers, a merger of programs, or a plan to close next year does not make this the final return.
• The end-of-year column still shows a figure. For example, an amount carried forward from the beginning-of-year column.

How to fix it

1. Check whether the organization really terminated in this period. If it did not, uncheck "Final return/terminated" and send the return again as a regular return.
2. If it did terminate, check line 25, column (B). If all assets were distributed or transferred by the end of the period, enter zero, make sure Part II balances, and send the return again.
3. If assets remained at the end of the period, the return cannot go in as a final return. One approach is to file this period without the Final box, and file the final return for the period in which the wind-up is complete. Discuss this with your board and any adviser.
4. Complete the rest of the final return. The instructions say a final return must:
   • have "Final return/terminated" checked in Item B;
   • answer "Yes" on line 36, liquidation, dissolution, termination or significant disposition of net assets;
   • include Schedule N;
   • include a certified copy of the articles of dissolution or merger approved by the state. If that is not available, include a copy of the governing body's resolution approving the plan.

The instructions say a final return is due by the 15th day of the 5th month after the liquidation, dissolution or termination.

When to contact the IRS

If you are unsure whether your organization's situation counts as a termination, call IRS Tax Exempt and Government Entities Customer Account Services at 877-829-5500 (toll-free). The IRS says this line takes questions about an organization's tax-exempt status. The Form 990-EZ instructions say it is open Monday through Friday.

Related codes

• F990EZ-114-02: if "Final return/terminated" is checked, line 36 must be answered "Yes."
• F990-158-02: if the Form 990 "Final return/terminated" box is checked, Schedule N must be included.
• R0000-931-02: a final return may be filed before the tax period ends. Other returns may not.