It’s time to talk about taxes, even if you’re a non-profit organization. Or should we say… especially if you’re a non-profit organization with tax-exempt status. For sure, non-profit management has many responsibilities, and navigating the complexities of non-profit taxation is one of them. But don’t worry!! We’re here to help you with a brief, easy-to-understand, guide on Form 990, but first…
What is a Form 990?
As per the Library of Congress, “the 990 is the tax form the Internal Revenue Service (IRS) requires all 501(c)(3) tax-exempt charitable and nonprofit organizations to submit annually”. This form acts as a record, showcasing your organization’s operational integrity, and provides a detailed view of your nonprofit’s financial activities, program investments, and overall governance.
Why is it Important?
The significance of the Form 990 extends beyond mere compliance. It informs the public, offering transparency into your organization’s financials, executive compensation, and the program’s spending. Moreover, Form 990 is vital for the IRS to confirm that your organization continues to meet the tax-exempt qualifications. It helps prevent abuse of the tax-exempt status and ensures that the nonprofit is aligned with its stated mission and is responsibly managing its finances.
In other words, it safeguards the integrity of the non-profit sector, ensuring organizations contribute positively to society and adhere to their mission and financial responsibilities.
Types of Form 990
There are various forms of the 990 document, each tailored to different sizes and types of organizations.
1. Form 990-N
Form 990-N, also known as the e-Postcard, is the tax form for nonprofits with annual gross receipts of $50,000 or less and it’s the simplest version. The 990-N requires basic organizational details such as name, address, EIN, and confirmation of the minimal financial threshold.
2. Form 990-EZ
The 990-EZ is designed for small to medium-sized nonprofits with gross receipts less than $200,000 and total assets under $500,000. It simplifies the reporting process, yet includes more detailed information than the 990-N, such as revenue breakdowns, program expenses, and grant funding.
It’s a bridge between the 990-N and the full Form 990, balancing comprehensiveness and filing simplicity.
3. Form 990
The standard Form 990 is a comprehensive filing that nonprofits with gross receipts of $200,000 or more, or total assets of $500,000 or more, must submit. It offers an in-depth view of the organization’s finances, annual activities, and operations. This form facilitates transparency, allowing stakeholders to thoroughly understand the nonprofit’s mission, financial integrity, and community impact.
4. Form 990-PF
Form 990-PF is specifically for private foundations, regardless of financial status. It requires detailed information on assets, grants, investments, and charitable activities. This form ensures that private foundations adhere to the regulatory requirements, showcasing their financial stewardship and grantmaking activities. It’s important for maintaining public trust and demonstrating the foundation’s commitment to its philanthropic mission and effective allocation of resources for charitable purposes.
How to Fill Out the Form 990
Filling out the Form 990 can be straightforward if you’re well-prepared. Start by gathering your financial records, understanding the specific form your organization needs to complete, and familiarizing yourself with the IRS instructions for that form. It’s a process that reflects your organization’s financial status and highlights your commitment to transparency and accountability.
- Gather Necessary Information: Collect all required financial records, including income statements, balance sheets, and records of donations and expenditures.
- Complete the Core Form: Fill in all applicable sections of the core form, ensuring accuracy in the financial data and consistency in the information provided.
- Add Required Schedules: Depending on the organization’s activities and financial status, additional schedules may be required to provide detailed information on various aspects of the organization.
- Review and Sign: The form must be reviewed for accuracy and signed by an authorized officer of the organization. Some organizations may also choose to have their Form 990 reviewed by a certified public accountant or a board member.
- File with the IRS: The completed form, along with all required schedules, should be filed with the IRS by the 15th day of the 5th month after the organization’s fiscal year ends. Extensions can be requested using Form 8868.
Extra Note: Deadline
Timely submission is crucial to maintain your tax-exempt status and avoid fines; the tax-exempt status will be revoked after three consecutive years without filling out the form. For organizations following the calendar year, the form is due by May 15th and will be public once it’s processed (12-18 month delay).
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