The Importance of Form 990

Posted on Wednesday, May 10, 2023

Nonprofit organizations do not pay income tax and therefore, do not file a tax return but most nonprofit organizations are required to file an informational return (Form 990) with the IRS.

What is Form 990?

Form 990 is used by the IRS to collect information on the organization’s activities, both financial and nonfinancial. Similar to a for-profit tax return, Form 990 requests information about revenues and expenses but it also asks questions about the organization’s programs and governance. It is used by the IRS to ensure nonprofits are meeting tax-exempt requirements and promotes compliance.

Your organization’s gross receipts and assets generally determine which of the 4 versions of Form 990 you are required to file. (There are some exceptions where certain types of organizations are not able to file Form 990-N.)

Form 990-N – Annual Electronic Filing Requirement for Small Exempt Organizations

Gross receipts are normally < $50,000

Form 990-EZ – Short Form Return of Organization Exempt From Income Tax

Gross receipts < $200,000 and total assets < $500,000

Form 990 – Return of Organization Exempt From Income Tax

Gross receipts > $200,000 or total assets > $500,000

Form 990-PF – Return of Private Foundation

Private foundation, regardless of financial status

When is the return due?

Regardless of the version filed, Form 990, is due the 15th day of the 5th month after your year-end. Organizations with a December 31 year-end must file the return by May 15th. Organizations with a June 30 year-end must file the return by November 15th. If for some reason you are unable to complete the form by the due date, you can file a 6-month extension, but the extension must be filed by the original due date. It is not uncommon for organizations to have to file an extension to give them additional time to prepare the return. This may occur when an organization’s audit is not yet complete or to give the board enough time to review the 990 prior to filing. Form 990-N cannot be extended.

If your organization files the return late, the IRS will impose penalties based on your gross receipts. Organizations with gross receipts of less than $1,000,000 for the tax year, will receive a $20 per day penalty for each day that the return is late. The maximum penalty is $10,000 or 5% of the organization’s gross receipts, whichever is less. The penalty increases to $100 per day and a maximum of $50,000 for an organization with gross receipts of more than $1,000,000. If an organization fails to file a return for 3 consecutive years, it will automatically lose its tax-exempt status.

Form 990 must be filed electronically with the IRS.

Who sees the Form 990?

Form 990 is open to public inspection, which means if someone asks you for a copy of your organization’s Form 990, you need to provide it to them. (Note that donors’ names and addresses on Schedule B are not open to public inspection.) In addition, the IRS makes available copies of the Form on its website. Other organizations such as GuideStar and Charity Navigator also provide copies of Form 990s filed with the IRS on their website. Many organizations are also required to provide a copy of their Form 990 to funding sources. This is why it is extremely important to make sure that the Form is completed in its entirety and correctly. A Form that is incomplete or filed on the wrong version is considered not filed with the IRS. It is also important for your board of directors to review your 990 prior to filing. Form 990 asks specifically if a copy of the Form has been made available to the governing body prior to filing. As the individuals responsible for the organization, it is important that they review and approve what is reported.

Contributed by: Carrie Minnich, MAcct, CPA | Partner | DWD CPAs & Advisors

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.