A Guide to Understanding and Filing Your Nonprofit’s 990 Tax Form

While your tax-exempt nonprofit organization may not have to pay any federal taxes, you do still need to file your organization’s information with the IRS. The document you will need is either a Form 990, or a Form 990-EZ with a Schedule A. We’ll be focusing on the Form 990. This form is what ensures that nonprofits are conducting their business in accordance with their public responsibilities as a nonprofit.

The Form 990 must be made public, and while it’s easy to hate the “extra” paperwork it requires, it can used as a helpful public relations tool for your organization. This is because an organization is able to clearly state its mission on the 990, list its accomplishments of the year before, and present this to the public.

Beyond outright presenting this information once organized for the Form 990, it allows donors to find you and see where you garner your revenue from, see and evaluate how sustainable your model is, and allow any potential employees to see how it pays its top level employees. Last, this allows potential board members to see who is already on the board, and how the organization’s cash reserves are doing.

Who Has to File

  • Form 990-N
    • If your nonprofit’s gross receipts were equal to or less than $50,000. Unlike most forms, this is filed as an e-postcard.
  • Form 990 EZ
    • If your nonprofit’s gross receipts for the fiscal year were under $200,000 while your total assets were valued at less than $500,000.
  • Form 990
    • If your nonprofit’s receipts were equal to or exceeded $200,000 while your total assets were valued at equal to or greater than $500,000.

Exceptions to Who Files

  • Faith-based organizations/Churches
  • Nonprofits that are not yet in the system. That is, if you have not yet applied to the IRS for an exemption from the federal income tax, you do not need to file a Form 990.
  • Subsidiaries of other nonprofits. Here, the given group would be filed by their parent group.
  • Government Institutions.
  • State organizations. Some state institutions, such as universities, are exempt because they provide essential public services.

When and Where to File

Form 990 needs to be filed “by the 15th day of the 5th month after the organization’s accounting period ends (May 15th for a Calendar-year filer). If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day.” A business day is any day that is not a legal holiday, a Saturday, or Sunday.

The return must be sent to:

Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0027

If the organization is located outside of the United States or in a U.S. possession, it must be sent to:

Department of the Treasury
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409

Ways to Utilize Your Form 990

A Form 990 does not only serve to make sure nonprofits are operating within their legal outlines, or for outside interests to research information about your organization, but as a reference and research document for you to use to improve your operations, it is a valuable tool.

The majority of non-profit organizations look for funding through donations and grants. Oftentimes, these are essential for the survival of the non-profit. Since the 2008-2009 recession and in the current still lasting recovery period from that, many individual donors, corporations, and foundations have been clamping down on where they donate. This has greatly increased the competition between nonprofits to earn the support of these donors.

The information provided in your Form 990 can help provide your organization an advantage in arguing your case to donors.

Compare your mission statement to that of similar organizations as listed on their Form 990. You can find these via Foundation Center’s 990 Finder. If your mission statement is less convincing than those you find during your research, you have a bit of work to do revising it.

Schedule A of your Form 990 will break down your financial support. Look to your neighbors to see if there is anything they are using that you are missing out on and can begin to use. Also, you can make certain that you are not too close to the threshold of transitioning from being a public charity to a private foundation.

Part VII of your Form 990 reports information of all officers in your organization, and it’s highest paid employees. Potential donors may use this information to compare your organization to another when deciding who to support.

Your revenue schedule is in part VIII. This allows you to evaluate what your unrelated business revenue is compared to the total revenue. Also, this allows you to see if your revenue is approaching the threshold that would threaten your exemption status. Here is where you can look at other organizations to see what their revenue sources are. It’s a great opportunity to learn from your neighbors and competitors.

Your expenses are reported in part IX. These are organized according to their function and nature. This is where existing and potential contributors can see where their support is going, and what it is funding. Potential and existing funders will want to see that their contributions are going towards programs, not to fundraising or padding salaries.

Keep Learning, Keep Improving

While filing financial reports is easy to see as a chore, as explored above it can result in excellent insights to how your organization operates, both for introspective improvement, and for discerning potential contributors.

It doesn’t end here, though.

Jacobson Jarvis will be hosting a free online Q&A over Adobe Contact on Wednesday, December 6th 2017 from 12:00pm – 1:00pm.

Being presented by Howard Donkin, this will cover the IRS rules for board independence, where to look in a tax return to find community benefit tests, public support tests, organized and operated tests, discrimination tests, commerciality tests, and lobbying tests. Also, this will continue to discuss how your tax return can be used as a fundraising tool to present your nonprofit in the best possible light to your potential donors.

Focused on helping non-CPA’s better understand and work through the essentials of a nonprofit tax return, two nonprofit specialists will be available to answer questions while discussing the required schedules, governance & policy pages and what IRS audit red flags to look for.