An unavoidable responsibility of running a nonprofit organization is complying with IRS regulations, including filing the informational return, Form 990, each year. In 2019 The Taxpayer First Act became a law requiring most tax-exempt organizations to electronically file their Form 990. In this brief article, we discuss how to e-file Form 990 as well as give some best practice tips for making the e-filing process as smooth as possible.
What Is Form 990
Form 990 is called the Return of Organization Exempt from Income Tax and it is an informational tax document that must be completed and filed electronically with the IRS every year for tax-exempt businesses. Form 990 is required to keep the tax-exempt status a nonprofit organization has been granted. Nonprofit organizations must report financial information about the completed tax year as well as information about the programs, activities, and mission of the organization.
When is Form 990 required?
Form 990 must be completed at the end of an organization’s fiscal tax year by the IRS-generated income tax return deadline for the year. Almost all nonprofit organizations that also have the IRS-approved tax-exempt status need to fill out an annual form including all nonprofit businesses that meet the following criteria:
- Tax-exempt organizations that are organized as 501(c)s, 527s, or 4947(a)1s
- Gross receipts exceeding $200,000 or assets totaling $500,000 or more
- Private foundations
Nonprofit organizations that have gross receipts under $50,000 are also required to file their information but can do so through Form 990-N (e-Postcard).
When is Form 990 not required?
While most tax-exempt entities are required to file an annual Form 990, there are some nonprofits that do not have to complete a Form 990. Churches and other organizations centered around federally protected faith-based activities are not required to complete Form 990. Other entities exempt from the filing requirement are government businesses and state institutions.
Form 990 Instructions
Knowing which version of Form 990 is best suited to the organization can save time and effort. The following list of IRS forms describes which organizations they pertain to.
- Form 990 – Used for organizations with gross receipts more than $200,000 or assets more than $500,000, organizations that sponsor or act as the parent entity to other organizations, 501(c)29 & 512(b)13 organizations.
- Form 990-EZ – Used by nonprofits with gross receipts under $200,000 and/or assets less than $500,000
- Form 990-PF – Informational return for private foundations
- Form 990-N (e-Postcard) – Most tax-exempt organizations with gross receipts less than $50,000
E-filing Form 990 requires more than referring to the Balance Sheet. The IRS requires that nonprofit organizations give details about their purpose and fundraising activities in addition to the financial details about income sources and amounts, expenses, assets, and outstanding debts. Form 990 asks organizations to disclose the names and compensations of officers, directors, managers, and key employees. The IRS uses this information provided on the form to decide if the organization is still worthy of its tax-exempt status.
In addition to e-filing Form 990, there are some supporting documents that must also be uploaded. A detailed checklist of additional information or attachments required is provided in Part IV of Form 990. Some commonly required attachments include the following:
- Schedule B –contributions received
- Schedule C – political activities
- Schedule D – detailed financial reports
- Schedule F – foreign activities
- Schedule G – fundraising activities
3 Best Practice Tips To E-File Form 990
Complying with the requirements of Form 990 is simple when your organization is prepared. For the most efficient way to complete this tax-exempt organization requirement, check out these 3 tips for e-filing Form 990.
Keep good records
Electronically completing Form 990 will require the organization to enter a lot of financial and organizational information. The best course of action to prepare is to practice organized bookkeeping throughout the year. Keep track of financial transactions like administrative expenses, donations, and program costs. The best way to have organized financial records is to use accounting software that is customized for your nonprofit, like Sage Intacct. It is also important to keep good records about any changes in Board Members, Managers, and Staff.
Consider the audience
When an organization e-files its Form 990, the report is reviewed by the IRS and made available to the public. Keep the following tips in mind when completing the form.
The IRS relies heavily on Form 990 to monitor nonprofit organizations since they are exempt from filing a standard income tax return. The IRS follows up on any inconsistencies found in the form with an audit, which is something all nonprofit organizations strive to avoid. Follow the instructions carefully and according to the IRS filing tips and be sure to file a complete return and include all required attachments.
Once an organization has filed its first 990, all of their financial and program information is made available to the public. This is an important fact to keep in mind when filling out the form. Take care to explain the organization’s mission in detail and be transparent about the past year’s activities and results as well as the goals for the upcoming years. Donors and government issues that nonprofits often rely on for revenues will review an organization’s Form 990 before making a substantial commitment or contribution.
Consult With An Expert
E-filing form 990 should not be an overwhelming experience, and one way to guarantee a painless process is to work with an accounting expert specializing in nonprofit reporting requirements. JFW Accounting Service can help your organization get the right processes in place to be prepared for a seamless e-filing experience. Give us a call today to get started or check out our blog for more information about Form 990.
Jo-Anne Williams Barnes, is a Certified Public Accountant (CPA) and Chartered Global Management Accountant (CGMA) holding a Master’s of Science in Accounting (MSA) and a Master’s in Business Administration (MBA). Additionally, she holds a Bachelor of Science (BS) in Accounting from the University of Baltimore and is a seasoned accounting professional with several years of experience in the field of managing financial records for non-profits, small, medium, and large businesses. Jo-Anne is a certified Sage Intacct Accounting and Implementation Specialist, a certified QuickBooks ProAdvisor, an AICPA Not-for-Profit Certificate II holder, and Standard for Excellence Licensed Consultant. Additionally, Jo-Anne is a member of American Institute of Certified Public Accountant (AICPA), Maryland Association of Certified Public Accountants (MACPA), and Greater Washington Society of Certified Public Accountants (GWSCPA) where she continues to keep abreast on the latest industry trends and changes.