A Beginner’s Guide to Filing a Form 990 for Nonprofit Organizations

Form 990

As such, it is better — although absolutely not recommended — to file an incorrect Form 990 than to not file at all. Not only will a noncompliant organization be fined, the IRS will also revoke the organization’s tax-exempt status if the organization fails to file a Form 990 for three consecutive tax years. Once the tax-exempt status is revoked, the organization will have to pay state income taxes as well. The organization must pay these taxes even while they re-apply for tax-exempt status until this status is reinstated by the IRS. Completing a 990 form for your tax-exempt organization may initially seem like yet another task to pile onto your already busy staff. However, you can use the process to help your team see how this IRS requirement fits into your larger donor cultivation plan.

Nonprofits with annual revenue of $500,000 or more must file the Form 990. Candid’s Online Librarian service will answer your questions within two business days. Websites of the Secretary of State or Attorney General where the organization is incorporated. Some states may make 990s and other public Law Firm Accounting and Bookkeeping 101 documents available online or upon individual request. This database is available by subscription or for free at our Candid partner locations. Eligible nonprofits with revenue or expenses under $1M can also gain a free year of access to Foundation Directory Essential through our Go for the Gold!

Extensions of time to file

The value that would ordinarily be paid for like services by like enterprises under like circumstances. A division of any state or local governmental unit which is a municipal corporation or which has been delegated the right to exercise part of the sovereign power of the unit. All activities intended to influence foreign, national, state, or local legislation. Such activities include direct lobbying (attempting to influence the legislators) and grassroots lobbying (attempting to influence legislation by influencing the general public). An annual accounting period ending on the last day of a month other than December. An endowment fund created by a donor stipulation (donors include other types of contributors, including makers of certain grants) requiring investment of the gift in perpetuity or for a specified term.

  • Is any organization that is described in section 501(c) or (d) and is exempt from taxation under section 501(a).
  • The organization must answer “Yes” if it liquidated, terminated, dissolved, ceased operations, or engaged in a significant disposition of net assets during the year.
  • Section 512(a)(6), enacted as part of the 2017 tax reform legislation, requires tax-exempt organizations to calculate UBTI separately for each trade or business.
  • Part VII, Section A, requires reporting of officers, directors, trustees, key employees, and up to five of the organization’s highest compensated employees.
  • If the organization doesn’t have a telephone number, enter the telephone number of an organization official who can provide such information.

If an amount is reported here, answer “Yes” on Part IV, line 11a, and complete Schedule D (Form 990), Part VI. The amount reported on line 10a must equal the total of Schedule D, Part VI, columns (a) and (b). Enter the total funds that the organization has in cash, including amounts held as “petty cash” at its offices or other facilities, and amounts held in banks in non-interest-bearing accounts. Properly distinguishing between payments to affiliates and grants and allocations is especially important if the organization uses Form 990 for state reporting purposes.

Tax-Exempt Organization Search (TEOS)

Printing costs that relate to conferences or conventions must be reported on line 19. Enter the total fees charged for management services provided by outside firms and individuals. The organization must enter the total amount of grants and other assistance made to foreign organizations, foreign governments, and foreign individuals, and to domestic organizations or domestic individuals for https://personal-accounting.org/accounting-basics-for-entrepreneurs/ the purpose of providing grants or other assistance to designated foreign organizations or foreign individuals. Use line 2 to report amounts paid by the trust to or for the benefit of miners or their beneficiaries. Enter the amount paid by the organization to domestic individuals in the form of scholarships, fellowships, stipends, research grants, and similar payments and distributions.

Schedule O (Form 990), Supplemental Information to Form 990 or 990-EZ, should be completed as the core form and schedules are completed. Subordinate organizations in a group exemption which are included in a group return filed by the central organization for the tax year shouldn’t file a separate Form 990, Form 990-EZ, or Form 990-N for the tax year. A controlling organization of one or more controlled entities, as described in section 512(b)(13), must file Form 990 and not Form 990-EZ if it is required to file an annual information return for the year and if there was any transfer of funds between the controlling organization and any controlled entity during the year.

Form 990 Resources and Tools

Payments under a compensation arrangement are presumed to be reasonable and the transfer of property (or right to use property) is presumed to be at FMV, if the following three conditions are met. A fixed formula can, in general, incorporate an amount that depends upon future specified events or contingencies, as long as no one has discretion when calculating the amount of a payment or deciding whether to make a payment (such as a bonus). The alternate test doesn’t apply if any employee of the mutual insurance company or a member of the employee’s family is an employee of another company that is exempt under section 501(c)(15) (or would be exempt if this provision didn’t apply). If any section 501(c)(15) insurance company (other than life insurance) meets both parts of the following test, then the company can file Form 990 (or Form 990-EZ, if applicable).

Membership dues can consist of both contributions and payment for goods and services. In that case, the portion of the membership dues that is a payment for goods or services should be reported on line 2, Program Service Revenue. The portion that exceeds the FMV of the goods or services provided should be reported on line 1b. M is an organization whose primary purpose is to support the local symphony orchestra.

Why Is a 990 Form Important?

To the extent the following examples discuss allocation of expenses in columns (B), (C), and (D), they apply only to filers required to complete those columns. After making these allocations, the column (C), line 25, total functional expenses would be $65,000, consisting of the $50,000 actual management and general expense amount and the $15,000 allocation of the aggregate cost center expenses to management and general. Foundation M, an organization exempt under section 501(c)(3), has the exempt purpose of improving health care for senior citizens.

Form 990

For example, report expenses for employee events such as a picnic or holiday party on line 9. Don’t include contributions on behalf of current or former officers, directors, trustees, key employees, or other persons that were included on line 5 or 6. Enter on line 6a the rental income received for the year from investment property and any other real property rented by the organization. Allocate revenue to real property and personal property in the spaces provided. Don’t include on line 6a rental income related to the filing organization’s exempt function (program service). For example, an exempt organization whose exempt purpose is to provide low-rental housing to persons with low income would report that rental income as program service revenue on line 2.

Filing modalities

Some states require or permit the filing of Form 990 to fulfill state exempt organization or charitable solicitation reporting requirements. Y appoints a majority of the board of directors of Z, a section 509(a)(3) supporting organization that invests funds and makes grants for the benefit of Y. Although Y controls Z, Z isn’t a local affiliate of Y that would require Y to answer “Yes” on line 10a.

  • Answer “Yes” if the audit was completed or in progress during the organization’s tax year.
  • The amounts reported on line 12 in columns (B), (C), and (D), plus the amount reported on line 1h, should equal line 12, column (A).
  • Whether a particular policy, procedure, or practice should be adopted by an organization depends on the organization’s size, type, and culture.
  • Candid makes no warranty of any nature about any information in tax returns displayed on its web site.
  • It must make the amended return available for inspection for 3 years from the date of filing or 3 years from the date the original return was due, whichever is later.

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