A nonprofit group has to be a lot of things: helpful, open-minded, persistent, generous, honorable, and principled. And it needs to be more than the sum of its parts in order to accomplish its mission.
But for all these things, nonprofits have to be transparent above all else. This means they need to be an open book with financial data, performance, activities, employees, and governing. These things have to be on full display to anyone.
IRS Form 990 is a major part of staying transparent. While most nonprofit groups are tax exempt, Form 990 serves as an “annual tax return” that is a public record of how an organization is run and led. Tax time for a nonprofit group is an opportunity for the organization to take a close look at how they are doing financially, how the projections for the past year lined up with actual expenses, where the organization is going, and what needs to be done to attain or maintain a positive trajectory.
This blog will discuss what goes into Form 990, the basics of when it needs to be filed, the types of 990 forms, and how a trusted and professional accounting partner can be an important resource when filing.
Form 990 is called the “Return of Organization Exempt From Income Tax,” and it is a comprehensive overview of your organization from top to bottom. It is a public document, meaning anyone with a computer, a search engine, and a free couple of hours can know how every dollar you got was spent over the past few years. People will be able to see how effective your spending was and find out whether these dollars were wasted or truly dedicated to furthering a cause or accomplishing a mission.
Form 990 due date: Form 990 must be filed by the 15th day of the 5th month from the conclusion of your organization’s accounting period, which means if December 31st is the end of your fiscal year, your Form 990 filing deadline is May 15th.
Form 990 Extension: Nonprofits get busy, so if they need more time, they can file a one-time, six-month extension.
Tax-exempt organizations with gross receipts equal to, or greater than, $200,000 with at least $500,000 in assets are eligible to complete Form 990. If your group does not fall within this range, you will likely be filing an alternate version of Form 990.
In addition, your organization must have:
- Unrelated gross income that equals or exceeds $1,000
- Maintained donor funds throughout the year
- Be associated with a controlled entity
Many organizations won’t meet the criteria to fill out a standard Form 990 (although any of them can) and can instead provide an alternate method of reporting.
- 990-EZ – This is a four-page, condensed version of the long-form 990, and it requires less work and time to complete. The EZ form is the way to go if your group is smaller and your gross receipts are between $50,000 and $200,000 for the year while total assets are less than $500,000.
- 990-PF – Private foundations usually act as subsidiaries of other nonprofits by providing funding instead of actual direction towards a cause. The IRS usually needs to know certain facts about these organizations, which requires a different, specialized form.
990-N (ePostcard) – Small organizations that bring in less than $50,000 can file an abbreviated form that only needs a few pieces of information to complete a yearly filing.
The 990 is a report of all income and expenses over a year, not simply what you made and spent, but where it came from and where it went. It includes important details about your organization that would interest anyone that has donated money or plans to. At the same time, it may seem like a tedious task to detail everything your group has done and accomplished through the year; the rule of thumb for anyone filling out Form 990 is to include as much detail as possible. More detail reduces the risk of the IRS asking for more information about certain transactions, and it demonstrates your group is serious about maintaining high levels of accountability and integrity.
- Your mission statement, whether it is a singular goal or an ongoing charitable mission.
- All financial data, including revenue, expenses, liabilities, and retained assets.
- Summaries of activities throughout the year
- Specifics about the governing body include directors, staff, and managers. This also includes employees and how they are compensated.
- Accomplishments during the previous year that validate your organization’s tax-exempt status.
Form 990 can be a daunting task for some nonprofit groups, especially when money and resources are secondary to accomplishing the mission. But it’s important to recognize that when a group approaches the 990 with honesty and professionalism, it can open doors to new donors and important new members to an organization that will bring a diverse set of skills and a renewed initiative to accomplish the mission.
Rubino is a professional accounting firm that understands the difficulties that nonprofit groups face, especially those that seem to have a revolving door of volunteers. This is why we offer professional nonprofit accounting consulting services that include filing Form 990.
There is no reason to be left in the dark about proper reporting and filing Form 990 or any other task including cash flow consulting and single audits. Call Rubino today to schedule a Form 990 consultation and make your Form 990 woes a thing of the past.
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