Maintaining tax-exempt status is critical for nonprofit organizations, and correctly filing IRS Form 990 is a key aspect of this process. Beyond compliance, the 990 form offers an opportunity for transparency, showcasing how a nonprofit manages its finances and supports its mission.
In this guide, we’ll explore the different types of IRS 990 forms, how to determine which form fits your organization, and tips for a smoother filing process.
Understanding IRS Form 990: What It Is and Why It Matters
IRS Form 990 is an annual reporting form that certain federally tax-exempt organizations must file with the IRS. It provides the IRS with an overview of the organization’s financial activities, including income, expenses, assets, and liabilities. For donors and stakeholders, the form serves as a public document that offers a transparent look at how the nonprofit manages its funds and supports its cause.
Why is it important to file the correct Form 990?
- Compliance: Filing the correct form helps your organization comply with IRS regulations, protecting your tax-exempt status.
- Transparency: The form provides insight into your financial management, enhancing trust with donors, grant-makers, and the public.
- Public Record: Form 990 is publicly accessible, meaning potential donors, partners, and other stakeholders can view it to assess your organization’s credibility.
Failure to file Form 990 for three consecutive years can result in automatic revocation of your nonprofit’s 501(c)(3) status. Understanding which form to file is crucial to maintaining compliance.
Types of IRS 990 Forms: Which One is Right for Your Organization?
- Who files: Nonprofits with annual gross receipts under $50,000.
- Purpose: This electronic form allows smaller nonprofits to meet IRS requirements with minimal reporting.
- Filing Requirements: The 990-N is filed electronically and asks eight basic questions about your organization’s finances and activities.
- Special Note: If your nonprofit’s average gross receipts stay under $50,000 over the past three years, you qualify for the 990-N.
- Who files: Nonprofits with annual gross receipts under $200,000 and total assets under $500,000.
- Purpose: A simplified version of the 990 for mid-sized organizations, requiring less detailed reporting.
- Filing Requirements: This four-page form can be submitted by mail to the IRS. Alternatively, organizations can file the full 990 if preferred.
- What it includes: Financial data, program achievements, and summaries of your nonprofit’s mission.
- Who files: Nonprofits with annual gross receipts of $200,000 or more or total assets of $500,000 or more.
- Purpose: This comprehensive form provides a detailed overview of your organization’s finances, programs, and governance.
- Filing Requirements: This 12-page form must be filed by mail and includes detailed information on your organization’s financial activities, executive compensation, and governance.
- Why it matters: Filing the full 990 demonstrates your nonprofit’s commitment to responsible fund management and regulatory compliance, enhancing trust with stakeholders and donors.
- Who files: All private foundations, regardless of income or assets.
- Purpose: This form provides the IRS with detailed information on grants, investments, and foundation activities.
- Filing Requirements: Similar to the full 990, the 990-PF is a comprehensive 13-page form filed by mail. It includes financial statements, grant distributions, and investment asset details.
- Special Considerations: Private foundations have distinct requirements, including excise taxes and minimum distribution rules, reported on the 990-PF.
When is Form 990 Due?
The deadline for filing IRS Form 990 is the 15th day of the 5th month following the end of your organization’s fiscal year. For organizations that follow a calendar year, the form is due on May 15th of the following year.
Tips for Preparing Your IRS Form 990
Filing your Form 990 correctly and on time is essential for maintaining your nonprofit’s compliance and reputation. Here are some tips to help streamline the process:
- Stay Organized Year-Round:
- Keep accurate, up-to-date records of income, expenses, donations, and program activities throughout the year. This will make it easier to compile information when filing season arrives.
- Review IRS Updates Annually:
- The IRS may adjust filing requirements, thresholds, and instructions each year. Stay informed of any changes that could affect your organization’s filing obligations.
- Seek Professional Guidance:
- Filing Form 990 can be complex, especially for larger organizations or private foundations. Consider consulting with a nonprofit accounting professional to ensure your form is accurate and complete, helping you avoid costly errors or penalties.
- Maintain Documentation:
- For contributions over $250, secure a written acknowledgment from the charity. For non-cash contributions over $500, complete IRS Form 8283, and for items exceeding $5,000, obtain a qualified appraisal.
Enhancing Credibility with Proper IRS Form 990 Filing
Properly filing Form 990 is not just about compliance—it’s also an opportunity to enhance your nonprofit’s credibility. By providing a transparent look at your financials, you demonstrate to donors and stakeholders that your organization is responsibly managing its resources and staying true to its mission.
If you have specific questions or need assistance, contact Lakeesha V. Browne, CPA. Send your questions here or schedule a free consultation today!
