Whether you run an organization or simply file as an individual, the first quarter of the year is tax time. A complicated time for many, filing taxes for a nonprofit can seem daunting, especially for those who leave it for the last second.
This article covers what every nonprofit needs to know about IRS Form 990, a must for organizations with tax-exempt status.
What Is the 990 Tax Form?
IRS Form 990 is an annual information return that gives the IRS information about what your organization did during the last fiscal year. Essentially, the goal of Form 990 is to monitor that nonprofits are keeping their word and doing the work that qualifies them as tax-exempt, so the form places significant emphasis on the activities, governing body, employees, programs and assets.
Form 990 includes a section that outlines the organization’s mission, recent updates and asset management during the past year. It also includes a thorough questionnaire regarding grants, fundraising, salaries, and other expenses.
In most cases, IRS Form 990 must be filed five months and 15 days after the end of the fiscal year.
Differences Between Form 990, 990-N and 990-EZ
There are four different categories of Form 990 for tax-exempt organizations. They are the 990, 990-N, 990-EZ, and 990-PF. Your organization will be required to file one of these, depending on your annual gross receipts and asset value.
First, organizations with gross receipts that are normally below $50,000 need to file Form 990-N for Small Organizations. Next, organizations with gross receipts below $200,000 and total assets below $500,000 must file Form 990-EZ or Form 990. Organizations with gross receipts surpassing $200,000, or with assets above $500,000 must file Form 990. And finally, private foundations must file Form 990-PF, regardless of their financial status.
This comprehensive list by the IRS defines each form, along with its instructions and who must file which.
How to File a 990?
Form 990 is an IRS form, meaning it is individual from your local or state tax filing.
Form 990 is a public document, meaning that donors may review it before deciding whether they want to engage with you. Considering this, many experts consider it as part of the nonprofit’s marketing and, as such, it should tell the organization’s story. However, the IRS has raised the issue of sending additional, non-requested materials when filing Form 990, like brochures or employee rosters, which could risk personal identifying information. To prevent any issues, make sure to only accompany your form with the official Form 990 schedules the form lists throughout its sections. This helps streamline the process and protects your employees’ and volunteers’ privacy.
How to Request an Extension for 990?
Form 990 is due on the 15th day of the 5th month after the close of the accounting period. Therefore, if you are on a calendar year schedule (meaning that the accounting period ends on December 31st), your 990 is due May 15th.
If you need extra time to complete your 990, you can file Form 8868 before your original filing deadline. Form 8868 is used by tax-exempt organizations to request a six-month extension to file Form 990. This extension only applies to 990 — not 990-N, which can’t be extended, although filing after the deadline has no penalty. That said, failing to file your 990 on time can lead to penalties and owed income tax, and failing to file it three years in a row may lead to losing your tax-exempt status.
Keeping your nonprofit’s finances in order may feel like an intimidating ordeal. There’s a lot at stake when it comes to declaring and filing your revenue and assets in order, from new contributions and partners to keeping your tax-exempt status and, most importantly, being able to fulfill your mission and serve your community to the best of your ability. At Trifecta Advising, we are your trusted partners that help you implement effective planning and programming, so that tax time goes by without a hitch. Book a consultation now.
Trifecta Advising is not an accounting firm, nor does it staff CPAs. This article is informational in nature, and you should consult your accountant to identify which forms are right for your nonprofit.