What Nonprofits Need to Know About IRS Form 990
Even though tax-exempt nonprofits do not pay federal taxes, they do have to file an information form with the IRS. That form is called a 990. Having to file the 990 makes sure that nonprofits conduct their business in a way that is consistent with their public responsibilities.
The 990, which must be made public, also provides an easy way for donors and other people interested in supporting a particular cause to find and evaluate the best charities to support. In a way, the 990 can be a public relations tool for a charity when care is taken to fill it out correctly and carefully.
An organization can clarify its mission on the 990 and detail its accomplishments of the previous year. A donor can find out where the group gets its revenue. A foundation can see just how sustainable the charity might be. A potential employee can know how well the nonprofit pays its top employees. And a potential board member can see who else is already on the board and what the charity's cash reserves look like.
All of that information and more can be found on the 990, making this form useful for anyone doing research on nonprofits. That fact makes it even more important that a nonprofit spend adequate time and energy to fill out their 990 carefully and on time.
What a 990 Form Does
IRS Form 990 is the tax document that federally tax-exempt organizations file each year with the IRS. This includes charitable nonprofits.
The IRS and the public can evaluate nonprofits and how they operate just by examining their 990s. The form collects information about the mission, programs, and finances of tax-exempt organizations. The 990 also gives each nonprofit an opportunity to report what it accomplished the prior year, thus making a case for keeping its tax-exempt status.
Due to recent revisions, Form 990 collects even more information such as disclosure of potential conflicts of interest, compensation of board members and staff, and other details having to do with financial accountability and avoidance of fraud.
Which Nonprofits Have to File a 990
- All private foundations, regardless of income. They file Form 990-PF.
- Most tax-exempt organizations with gross receipts of $200,000 or assets worth $500,000
- Larger nonprofits that have gross receipts of more than $50,000 may file Form 990 or 990-EZ.
- Small nonprofits with gross receipts of $50,000 or less must file the 990-N (e-Postcard) to maintain their exempt status.
- Organizations that are tax-exempt under Sections 501(c), 527, or 4947(a)(1) of the U.S. tax code, and that do not fall into the exemptions listed below.
Organizations That Are Exempt From Filing Form 990
- Churches and most faith-based organizations such as religious schools, missions or missionary organizations. The criteria for being classified as a church are listed in the Tax Guide for Churches and Religious Organizations (IRS Publication 1828).
- Subsidiaries of other nonprofits, where there may be a group return filed by the parent group.
- Nonprofits not in the system yet. If you are an incorporated nonprofit or an unincorporated nonprofit in your state but don't plan to apply to the IRS for exemption from federal income tax, you don't have to file a Form 990.
However, if your organization claims to be tax-exempt and intends to file with the IRS by the end of the 27th month from the date of your incorporation, you must file Form 990 (or 990-EZ or 990-N as appropriate) during the 27 month period, even though no application has been submitted to the IRS nor any determination yet received.
- State institutions. Some state institutions are exempt because they provide essential services (a university is an example).
- Government corporations.
- To make sure that you do or don't have to file a return, check the IRS list of exceptions. There are consequences if you don't submit when required.
When to File the 990
You must file your 990, 990-EZ, 990-N, or 990-PF by the 15th day of the 5th month after your accounting period ends. So, if your fiscal year ends on December 31, the 990 is due on May 15 of the following year. Two ninety-day extensions are allowed, except for 990-N (postcard) filers
It's important that you file and on time. If you don't file a Form 990 for three years in a row, your tax-exempt status will be automatically revoked by the IRS.
Many nonprofits have lost their tax-exempt status in recent years because they did not file a 990 as required. These are often small nonprofits that did not realize that even with receipts under $50,000, they must file the 990-N.
The 990-N is a postcard with minimal information that can be filed electronically. Don't miss doing so. If you think that your status has been revoked, check with the IRS.
If you do lose your exempt status by not filing the 990, there is no appeal process with the IRS. Your nonprofit could have to pay income taxes, user fees, and have to file additional paperwork. Avoid this arduous process by filing on time each year.
Which 990 Form to File
Forms 990, 990-EZ and 990-N are filed by tax-exempt organizations, Which form you file depends on your gross receipts. New rules are being phased in, so consult this IRS threshold chart to find out which form to file.
The 990-PF is filed by all 501(c)(3) private foundations and 4947(a)(1) nonexempt charitable trusts.
How to View a Nonprofit's 990 form
You can search for a nonprofit's Form 990 at the IRS, but you can also view it at the charity you are interested in.
Nonprofit organizations are required to make their 990 and their exemption application available for public inspection without charge at their regional and district offices during regular business hours.
Many nonprofits now make 990s available on their websites. You can also view them at Guidestar, an organization that provides information about nonprofits, and search for them at ProPublica, a site for investigative journalism.
A nonprofit's 990 can provide valuable information for donors and grantors such as foundations, governments, and corporations. Since 990s are public documents and widely available, nonprofits should be diligent about filling them out correctly and filing them on time.