What Is Form 990 and Which Nonprofits Need to File It?

Tax-exempt organizations generally do not pay federal income tax in the same way as for-profit businesses, but that does not mean they have no annual filing responsibilities. Many nonprofit organizations must submit an annual information return to the IRS, commonly through Form 990.

Form 990 provides information about a nonprofit's finances, activities, governance, and operations and is an important part of maintaining ongoing tax compliance.

What Is Form 990?

Form 990, Return of Organization Exempt From Income Tax, is an annual information return used by many tax-exempt organizations.

Rather than functioning solely as a traditional income tax return, Form 990 provides the IRS and the public with information about an organization's:

• Revenue

• Expenses

• Assets and liabilities

• Programs and activities

• Compensation

• Governance

• Tax compliance

Because Form 990 filings are generally publicly available, they can also provide donors, grantmakers, and other interested parties with information about a nonprofit's operations.

Do All Nonprofits Need to File Form 990?

Many tax-exempt organizations have an annual IRS filing requirement, but not every nonprofit files the same version of Form 990.

The appropriate filing generally depends on factors such as the organization's gross receipts and total assets.

Certain organizations may also qualify for an exception from the annual Form 990 filing requirement.

What Is Form 990-N?

Smaller tax-exempt organizations may qualify to submit Form 990-N, commonly called the e-Postcard.

This is a simplified electronic notice requiring considerably less financial information than a full Form 990.

Even though it is simpler, eligible organizations generally still need to submit it annually to maintain compliance.

What Is Form 990-EZ?

Some organizations that fall within applicable IRS financial thresholds may be eligible to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax.

Form 990-EZ requires more information than Form 990-N but is less extensive than the full Form 990.

Determining which form applies should be done using the organization's financial information for the applicable tax year.

What Information Is Reported on Form 990?

A full Form 990 can require substantial information about the organization.

Depending on the nonprofit, reporting may include:

• Contributions and grants

• Program service revenue

• Fundraising revenue

• Salaries and compensation

• Program expenses

• Administrative expenses

• Fundraising expenses

• Assets and liabilities

• Officers and key employees

• Governance policies

Additional schedules may also be required depending on the organization's activities.

When Is Form 990 Due?

Form 990 is generally due on the 15th day of the fifth month after the end of the organization's accounting period.

For a nonprofit operating on a calendar year, that generally means a May 15 filing deadline.

Organizations using a fiscal year will have a different deadline based on when their accounting year ends.

Extensions may be available when additional time is needed.

What Happens If Form 990 Isn't Filed?

Failing to file a required Form 990 can result in penalties and other compliance problems.

One particularly important rule applies when an organization fails to submit a required annual return or notice for three consecutive years. Its federal tax-exempt status can be automatically revoked.

That makes annual filing compliance important even for smaller organizations with relatively little financial activity.

Does a Nonprofit Pay Income Tax?

Tax-exempt status generally means qualifying income related to the organization's exempt purpose is not subject to federal income tax in the same manner as ordinary business income.

However, nonprofits can sometimes generate unrelated business taxable income (UBTI) from activities that are not substantially related to their exempt purpose.

Depending on the circumstances, this can create additional filing and tax obligations.

Why Is Accurate Nonprofit Accounting Important?

Form 990 preparation relies heavily on the organization's accounting records.

Maintaining accurate bookkeeping throughout the year makes it easier to properly classify contributions, grants, program expenses, administrative costs, fundraising expenses, and other transactions.

Good accounting can also provide nonprofit leadership with a clearer picture of the organization's financial position.

Stay Current With Nonprofit Filing Requirements

Form 990 is more than an annual administrative task. It is an important part of maintaining a nonprofit organization's federal tax compliance and providing transparency about its activities and finances.

James Ridout CPA provides Form 990 preparation, nonprofit accounting, bookkeeping, financial reporting, tax compliance support, and ongoing CPA guidance for nonprofit organizations.

Need help preparing your nonprofit's Form 990 or determining which return you need to file? Schedule a consultation with our team.