Ah, the IRS form 990. It keeps some financial officers in the nonprofit industry up at night. Others sleep like a baby.
What’s the difference? Why does this big, bad tax document worry some and not others? It’s all in how prepared you are for your annual tax filing.
The National Center for Charitable Statistics estimates there are roughly 1.5 million nonprofits in the United States. However, according to the Nonprofit Quarterly (NPQ), the Internal Revenue Service revoked tax-exempt status from 760,000 nonprofit organizations from 2010 to 2017.
Why did these organizations lose tax-exempt status? Simple. They didn’t file their 990 correctly.
Worried? Don’t be.
For those whose nightmares are filled with endless tax form schedules flying at you from the dark void, you can rest easy—once you have the right tools to understand the 990 form, you’ll be able to file with confidence and ease.
File 990’s mission is to lift any apprehensions you have and guide you through the ins and outs of your annual form 990.
Without further ado, let’s run through some basics of what this form is and how you can dominate it each and every year.
So, What Is the IRS Form 990?
Form 990 Basics
The general purpose of the 990 form is two-fold. It:
- helps maintain your tax-exempt status with the IRS
- provides an important public document for your donors and stakeholders
The 990 document gives both the IRS and your stakeholders important insight into your organization’s financial contributions, grants, gifts, and revenue; cash, savings, investments, assets, and liabilities; your fundraising mission and activities; information about key employees and officers and their finances; and an overall picture of your organization’s operations during the previous tax year.
It also gives you a permanent record of this information that can provide important insight into your organization’s accomplishments, potential setbacks, and future goals.
Nonprofit Tax Filing Points of Emphasis
Before we get into the Form 990 itself, let’s go over a few of the most basic points of order to make sure you’re sorted before you file.
- Are you tax-exempt?
If you’ve successfully filed your Form 1023, your nonprofit is recognized as exempt from having to pay federal income tax. Simple, right?
However, as mentioned above, many organizations have lost their tax-exempt status after missing a 990 filing deadline.
Has your organization ever:
- missed one or more filing deadlines?
- filed late?
- been fined or otherwise penalized for incorrect filing?
- been informed by the IRS that you’re in danger of losing tax exemption?
If this is you, you may not lose your tax-exempt status right away, especially if you file for an extension or follow other guidelines set by the IRS to rectify any mistakes or misfilings.
However, not filing for 3 consecutive years means that you’re in danger of automatic revocation of tax exemption. That means you’ll have to pay taxes—unless you qualify to have the IRS reinstate your status as tax-exempt.
Before you file, verify that your organization isn’t required to pay taxes.
The IRS publishes a list of organizations that have lost tax exemption here.
- What’s the 990 Filing Deadline to Remain Tax-Exempt?
According to the IRS: “Form 990 is due on the 15th day of the 5th month following the end of the organization’s taxable year. For organizations on a calendar year, the Form 990 is due on May 15th of the following year.”
As stated above, if you think you’ll miss this deadline for some reason, file for an extension rather than not filing and risking losing your status as tax-exempt.
- There’s More Than One 990 Form. Which Do You File?
If you’re an eligible tax-exempt nonprofit organization, you file whichever form best fits your finances. Here’s a rundown of the basic forms:
You file the digital only Form 990-N if your organization has gross receipts less than or equal to $50,000
You file the Form 990-EZ if your organization has gross receipts less than $200,000 and total assets less than $500,000.
You file the full Form 990 if your organization has gross receipts more than or equal to $200,000 or total assets more than or equal to $500,000.
There are several other forms, including the Form 990-PF for private foundations, but those listed above are the most common.
What You’ll Need to Prepare to File
Each of the 990 forms has its own requirements for filing. You can get an idea by viewing the most common forms here:
Check to make sure filing rules haven’t changed in the past tax year—or that your organization needs to file a different form this time.
The main thing is to get prepared well ahead of time rather than waiting until the last minute. That means:
- getting all your financial reviews and audits done well ahead of the filing deadline
- going over your 990 filing from the previous year
- ensuring all your chapters are prepared to file their 990s
- check that your finances for the past tax year are complete and compile this info
- compile info on your officers, employees, donors, and other info required by the IRS
- review your finances with your team/board
Having a plan between your financial officer and other board members helps avoid mistakes in filing or missed deadlines.
So does having a certified e-filer.
What’s a Certified E-Filer?
Running a nonprofit’s finances can be a complex and time-consuming task. Needlessly wasting time and energy makes it harder to reach your goals as an organization.
One of the golden rules of success has always been to delegate. This rings true for nonprofits, because delegating frees up resources for you and your team to focus on success.
Hiring a certified form 990 e-filer like File 990 can help give you a consistent, streamlined, secure path to annual tax filing and free up important resources for you and your team.
Whether you’re filing a 990-EZ or 990-N form, we can do the heavy lifting once you provide some basic information about your organization. We’ll remind you when it’s time to file, so you never miss another deadline.
File 990 can even help you file for your other chapters with our enterprise option.
Get started e-filing your nonprofit tax forms with us today.