Remember that beginning with tax year 2005 returns (tax years ending on or after December 31, 2005), organizations with total assets of $100 million or more that also file 250 or more returns with the IRS (income tax, excise tax, employment tax, and information returns) were required to file the Form 990 electronically. For purposes of determining if 250 or more returns are filed, each Form W-2 and quarterly Form 941 and Form 1099 is considered a separate return. 

The electronic filing requirement expands for taxable years ending on or after December 31, 2006 to include exempt organizations with assets of $10 million or more and all Private Foundations. The 250 return threshold also applies when determining the electronic filing requirement for the year.

If an organization is required to file electronically but fails to do so, it will be penalized as if the organization failed to file a return. The penalty for organizations with gross receipts exceeding $1 million is $100 per day for each day the failure continues up to a maximum of $50,000 per return. 

Here are some tips when preparing returns for electronic filing as the IRS system in accepting the returns is very exacting. To minimize the possibility of a rejected return, make sure the return is complete and every question is answered. Even if the answer is not applicable or zero, make sure to input 0, N/A, or none in the field as leaving an answer blank will cause the return to be rejected.  However; be aware of whether a number or text is asked for, as putting text in a numeric field will cause a rejected return.

Even if an organization is not required to file electronically, it may do so. The IRS began accepting electronically filed Form 990, Form 990EZ, and Form 990-PF in the 2004 tax year.