When are Nonprofit 990s Due
Nonprofit 990 forms are required for certain nonprofits that are exempt from federal income tax. These nonprofits must annually file a Form 990 on the 15th day of the 5th month after the close of the tax year to maintain their tax-exempt benefits. Nonprofits with gross revenue over $50,000 must annually file an IRS Form 990EZ, while nonprofits with a gross receipt below $50,000 must file a Form 990-N.
Nonprofits must make a habit of filing these 990s as they demonstrate compliance with the government and assure credibility to donors. If a nonprofit forgets to file its Form 990 for three consecutive years it loses its tax-exempt status!
Nonprofit 990s Purpose
All 990s are meant to be viewable to the public for corporations and potential donors to calculate a nonprofit’s overhead. A 990 includes an organizational summary, mission statement, schedule, tax statements, management policies, revenue, balance sheet, expenses, net assets, and all financial statements. By providing a summary and open record of transactions, it builds a good reputation of a charitable organization. Furthermore, many donors use 990s as a basis for selecting which nonprofit they want to support
. Donors tend to gravitate towards more charitable, well-funded, action-oriented, and established nonprofits that can display the donors’ money being put to good use. 990s are excellent tools to both help donors and nonprofits create transparent relationships with one another.
Nonprofits that need to File 990s
Organizations that are tax-exempt do not have to file federal income tax forms, but must instead file a Form 990. The most common nonprofit type that needs to file a 990 is a 501(c)(3). In order for a nonprofit to qualify for a 501(c)(3), an organization must fall under a purpose for operating outside monetary gain. Such purposes include scientific, educational, religious, charitable, literary, public safety, and prevention of animal/human cruelty. Nonprofits that fall under these purposes must file their 990s and comply with the IRS. 990s are available on organizations’ websites or 990 databases like Guidestar.
Nonprofits Exempt from 990s
Even though most nonprofits file a Form 990, not all of them are required to and also do not have to pay federal income tax. Entities that are exempt from filing a 990 include faith-based organizations, subsidiaries of other nonprofits, most government corporations, and state institutions that provide essential services. It is important for all organizations to check their classifications by the IRS because there can be a loss of tax exemption if nonprofits that qualify do not apply on time.
990s have helped nonprofits operate on transparent levels, assuring donors that their money is put to good use. It is common for donors to prefer their money to go to a nonprofit’s mission rather than overhead expenses, but a mature donor knows that organizational sustainability is just as important. 990s have bridged the gap between nonprofits and the public, allowing for society to come together and build a better future.
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