Written by: Mathew Tooker
Reading Time: 7 minutes
Your nonprofit had a successful year organizing fundraising campaigns, hiring new employees, and expanding awareness of your cause. Your fiscal year is coming to a close, meaning that the tax filing deadline is quickly approaching.
All registered tax exempt nonprofits are required to file their annual taxes. This can seem overwhelming, but in this post we’ll walk through the basics of Form 990 and how to best prepare to file.
Form 990 FAQs
What is Form 990?
All registered 501(c)(3) tax-exempt charitable organizations are required to file a Form 990 annually. Although 501(c)(3) organizations are tax-exempt, Form 990 is a way for the Internal Revenue Service (IRS) to assess how much money the organization has earned over the course of their fiscal year.
Who is required to file a Form 990?
Every 501(c)(3) organization must file annually to report their revenue, even if the nonprofit is dissolving. Nonprofits are required to file annually or they can lose their tax-exempt status.
Non-tax-exempt organizations like charitable trusts under Section 4947(a)(1) and tax-exempt private foundations under Section 501(c)(3) are required to file Form 990-PF.
What are the different types of Form 990?
Depending on a nonprofit’s gross annual receipts and total net assets, organizations will qualify for different versions of Form 990. Generally, larger organizations with more gross annual receipts or total net assets will have more complex Form 990s.
There are three types of Form 990s for nonprofit organizations, and an additional form for private foundations. According to File 990, here are some of the key differences between the various Form 990s:
- Form 990-N is filed by small organizations with less than $50,000 of gross annual receipts.
- Form 990-EZ is filed by mid-to-large organizations with gross annual receipts between $50,000 and $200,000.
- Form 990 is filed by larger organizations with gross annual receipts over $200,000 or with total net assets over $500,000.
- Form 990-PF is filed by private foundations regardless of their financial status.
Organizations should file the simplest version of Form 990 that they qualify for. Nonprofits can file more complex versions of Form 990 if they wish, but to save time and money, this practice is not commonly recommended.
How do I file Form 990?
All versions of Form 990 can now be downloaded from the IRS website. The simplest version, Form-990-N, only requires 8 pieces of information about your organization:
- Employer identification number
- Tax year
- Legal name and mailing address
- Any other names the organization uses
- Name and address of a principal officer
- Website address (if applicable)
- Confirmation of your organization’s gross annual receipts
- If the organization is dissolving, a statement that the organization is doing so
All versions of Form 990 include the above questions and more depending on the complexity required. The forms increase in complexity for organizations based on the gross annual receipts cutoff. For example, after each revenue bracket, more detail is requested about how nonprofits handle their finances including questions about balance sheets, grant usage, and what achievements the organization has made within the year.
Once a nonprofit has completed their Form 990, they can submit it electronically to the IRS. All versions of Form 990 can be submitted electronically, and this should be done through your organization’s account on the IRS website.
When is the deadline for Form 990?
The deadline for Form 990 is the fifteenth day of the fifth month following the end of a nonprofit’s fiscal year. For example, if a nonprofit’s fiscal year ends in December, the deadline would be May 15th.
If organizations that make less than $1,000,0000 miss the deadline, they will be fined $20/day for up to $10,000 or 5% of their gross annual receipts—whichever amount is less. Organizations that make more than $1,000,000 will have higher fines.
If an organization fails to meet the deadline or file a Form 990 for three consecutive years, they will lose their tax-exempt status. The organization will be required to refile to regain their status and include a statement of why they have to refile and why they were unable to submit their Form 990s on time.
Because of the high costs associated with missing this deadline, it is essential to keep track of your due date and complete your Form 990 on time.
Form 990 Best Practices
Submit for extension if needed
Submitting Form 990 by deadline is essential for retaining tax-exempt status and nonprofit compliance. If an organization needs more time or suspects they will not be able to submit their Form 990 by the deadline, they should submit a Form 8868 for an extension.
Although the IRS has firm rules, they are willing to grant extensions once a Form 8868 is submitted. Once approved, organizations can receive up to a six month extension from the original deadline.
Nonprofits cannot request an extension after the deadline has passed, so as a best practice, any organization that has doubts about submitting Form 990 on time should request an extension.
Appoint an employee to oversee filing
Nonprofits invest in numerous tools to manage their organization, so investing in a tool to streamline tax filing should be no different. Nonprofits often have an accountant or finance department dedicated to fundraising efforts and day-to-day operations. Depending on how large an organization is and which Form 990 they submit, it can be lengthy to find all the necessary information to complete it.
To refrain from making the process longer than needed, organizations should appoint an employee yearly to be in charge of gathering information and ensuring the form is submitted on time. This employee should communicate with the necessary people to ensure the deadline is met.
Invest in a tax filer
Completing Form 990 can be time consuming. Looking for an IRS certified tax filer can help nonprofits simplify their tax filing and save time. The ideal tax filer will be either a person or provider with experience working with nonprofits and familiar with the various Form 990s.
E-filers are automated online tax filers, and are a cost effective choice that gives organizations total control over their submissions. Recharity’s list of nonprofit tax filers list features to look for in an e-filer such as:
- Deadline reminders
- Submission tracking
- Chapter consolidation
- Good customer service
With a Form 990 e-filer, organizations can receive reminders year-round, easily consolidate all of their chapter’s financial information, and track when their form has been approved.
Now that you understand a Form 990, what information is required, and how to avoid the consequences from missed deadlines, you’re one step closer to learning nonprofit compliance. Form 990 is just one part of nonprofit compliance, so be sure to keep this in mind if you’re ever in charge of finances or legal compliance for a charitable organization.
About the Author:
Mathew Tooker is an expert in sales forecasting, analytics, goal-setting, client growth, and business development. With experience serving the Greek life community, nonprofits, and other member-based associations, Mathew is dedicated to providing tremendous value to his clients.