Even though your organization may be tax-exempt, you’ll still have to file certain Internal Revenue Service (IRS) forms, such as Form 990. This form can actually be extremely helpful in providing a picture of your nonprofit’s inner workings — not only to the general public, potential members, and donors, but to those working at your nonprofit as well.
What Is Form 990?
Form 990: Return of Organization Exempt From Income Tax is an IRS form required annually from tax-exempt organizations such as nonprofits and charities. If your organization is exempt from tax under the IRS Code Section 501(a), unless it is a religious organization or an organization making less than $25,000 in gross receipts, then this form is a necessity.
What Is Included in Form 990?
Organizations such as nonprofits and charities use Form 990 to describe in detail their mission, record their yearly activities, explain how they are governed, and disclose financial details on revenues, assets, expenses, liabilities, and employee compensation. This form ensures that the nonprofit that is filing is conducting its business as a nonprofit accurately and within the legal parameters.
[Related: A Guide to Understanding and Filing Your Nonprofit’s 990 Tax Form]
How Will the Form Affect My Organization?
The form is eventually made public, so clearly stating your mission and listing your organization’s accomplishments within the form can work to your advantage and help build your reputation as an honest and important nonprofit. Potential employees, members, or donors can review your Form 990 and see where your revenue comes from, worker compensation, a list of board members, and your mission and model.
Ensure that your recorded data, monetary or otherwise, is accurate, and your mission statement is well-written and convincing, as the information provided in Form 990 can help earn the support of donors.
Fundamental Sections in Form 990
Important sections in Form 990 include (but are not limited to) the following:
- Schedule A: Breaks down financial support
- Part VII: Reports information on all the officers and highest paid employees in your organization
- Part VIII: Includes a revenue schedule and resources to ensure you’ll keep your exemption status
- Part IX: Reports expenses and lists their function and nature, which helps people to see where their support is going and what it is funding
When done correctly, Form 990 can work to your organization’s advantage by providing a clear, accurate snapshot of your nonprofit to the public. This information can also provide you and your coworkers with insights on how your organization runs, where it is succeeding, and what needs improvement.
If you have any other questions about Form 990 or other not-for-profit tax issues, contact the experts at Jacobson Jarvis today!
