When filling out a Nonprofit 990, there are several key things that you should keep in mind to maintain compliance with IRS regulations and to reap the benefits of increased transparency and accountability. You should accurately report all revenue and expenses, report any significant organizational changes, and be mindful of public disclosure requirements. Properly filling out the 990 can help your nonprofit organization avoid penalties and fees from the IRS and serve as an essential tool for organizational planning and evaluation. In today’s podcast, Joseph Scarano from Araize and Stephen Halasnik from Financing Solutions discuss key things to know when filling out nonprofit 990
Summary
Key Things to Know When Filling Out a Nonprofit 990
As a nonprofit organization, it’s essential to maintain transparency in all financial matters, including filing annual tax returns. Nonprofits are required to file Form 990 with the IRS every year, which provides information about the organization’s finances and activities to the IRS and the public. This form is crucial for maintaining the nonprofit’s tax-exempt status and provides donors and stakeholders with transparency and accountability. However, filling out Form 990 can be daunting, with its detailed requirements and strict deadlines.
In this article, we will provide crucial information on filling out the nonprofit 990 to ensure that your organization complies with tax laws and regulations.
What Is Nonprofit 990 Form?
The nonprofit 990 form is a tax document that must be filed annually by most tax-exempt organizations in the United States. The Internal Revenue Service (IRS) uses the form to collect information about the organization’s finances, governance, and activities.
The form is divided into several sections, including revenue, expenses, and changes in net assets; program service accomplishments; governance, management, and disclosure; and compensation of officers, directors, and key employees. The form is a public document, meaning anyone can request a copy from the IRS.
They are used by potential donors, grantmakers, and other stakeholders to evaluate the organization’s financial health and governance practices. In addition, it helps stakeholders determine whether the organization is using its resources efficiently and effectively and operating in compliance with tax regulations.
Why Should Nonprofits Fill Out Form 990
Nonprofits should fill out Form 990 for many reasons:
- Legal requirement: Nonprofits must file Form 990 with the Internal Revenue Service (IRS) every year unless they are exempt from doing so.
- Transparency and accountability: Form 990 provides transparency and accountability to donors, stakeholders, and the public. It contains information about a nonprofit’s mission, governance, finances, and operations, which can help donors make informed decisions about where to donate their money.
- Fundraising: Many foundations and individual donors require nonprofits to provide a copy of their most recent Form 990 as part of the grant application or donation process. Filing Form 990 can increase a nonprofit’s chances of receiving funding.
- Tax-exempt status: Filing Form 990 is one of the requirements for maintaining a nonprofit’s tax-exempt status. Failure to file for three consecutive years can result in revocation of tax-exempt status.
- Compliance: Filing Form 990 can help nonprofits comply with federal tax laws and regulations and avoid potential penalties or fines for noncompliance.
What Are the Key Thing to Know When Filling Out a Nonprofit 990
Below are the essential things to know while filing your nonprofit 990:
Understand the Purpose of Form 990
Form 990 provides information about nonprofits’ finances and activities to the IRS and the public. It also ensures that the nonprofit comply with tax laws and regulations. It is essential to understand the purpose of the form so that you can provide accurate and complete information.
Know Which Form to Use
There are several versions of Form 990, depending on the size and type of nonprofit. Make sure you are using the correct version of the form for your organization. The different versions of the form are:
- Form 990-EZ: for organizations with gross receipts of less than $200,000 and total assets of less than $500,000
- Form 990: for organizations with gross receipts of $200,000 or more or total assets of $500,000 or more
- Form 990-N: for organizations with gross receipts of less than $50,000
Gather the Required Information
Before filling out Form 990, gather all the necessary information. This includes information about the organization’s finances, activities, governance, and compensation. Ensure you have all the necessary documents, such as financial statements, board meeting minutes, and compensation information for key employees.
Pay Attention to the Detail
Form 990 is a detailed document that requires accurate and complete information. Pay attention to detail and double-check all the information before submitting the form. Mistakes or omissions can lead to penalties or even the loss of the nonprofit’s tax-exempt status.
File on Time
The deadline for filing Form 990 is the 15th day of the fifth month after the end of the nonprofit’s fiscal year. Ensure you file the form on time to avoid penalties and the loss of the nonprofit’s tax-exempt status.
Conclusion
Filling out Form 990 may seem daunting, but it is critical to maintaining a nonprofit’s tax-exempt status and providing transparency to donors and other stakeholders. By understanding the purpose of the form, knowing which form to use, gathering the required information, paying attention to detail, and filing on time, you can ensure that your nonprofit complies with tax laws and regulations.
Learn About Our Guest
Joseph Scarano is the CEO of Araize, a software provider for nonprofit organizations. He is an inactive CPA and has spent over 40 years providing accounting services and software to the nonprofit industry. He has served on numerous Nonprofit Boards as Treasurer.
Learn About Stephen Halasnik
Stephen Halasnik is the host of the popular Nonprofit MBA Podcast. The Nonprofit MBA podcast aims to help nonprofit leaders and their teams. Stephen is the Co-founder and Managing Partner of Financing Solutions, a leading provider of loans for nonprofits in the form of a Line of Credit. Stephen is a best-selling Amazon author and a leading authority on building great, purpose-driven businesses.
Stephen lives in New Jersey, and his top life mission is to raise his two sons, Michael and Maxwell, to be good men