Form 990: What Nonprofits Need to Know

Tax Professionals' Resource
August 7, 2013 — 1,742 views  
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The fact that the nonprofit organizations are exempt from tax does not mean that they are also exempt from filing revenue forms. The Internal revenue Service, or IRS, mandatorily requires the filing of revenue forms for them. In other words, they don’t have to pay tax, yet they must fill in the information needed by the IRS.  

What is Form 990?

IRS Form 990 is a tax document that tax-exempt nonprofit organizations file each year. The 990 allows the IRS and the public to evaluate nonprofits and how they operate. The new tax form of 2008 filed in 2009 requires greater disclosures. These disclosures require information of compensation to the staff and board members, likely interest conflicts, and several other details relevant to fraud avoidance and financial accountability. The IRS 990 form is important in context of public disclosures from nonprofits especially since there is no legal obligation for them to come out with annual reports. Except under certain special circumstances, the law doesn’t require independent financial audits.

Although the organizations that must file 990s are income tax exempt on certain types of incomes including programs and purposes exempt, some private foundations are required to pay excise tax on the investment income incurred by them. Once 990s are completed and filed, it becomes a public document, available for anyone to see. This is a special requirement under Internal Revenue Code, Section 6104, according to which the public access has to be made. For private foundations, the required form is 990-PF that needs to be made available by private foundations for public inspection.   

Eligibility and Exemptions

While certain nonprofits have to file 990, there are others that are exempt. The organizations that have to file a 990 include private foundations, large nonprofit institutions, and small nonprofit institutions. A 990-PF form must be filed by private foundations, large organizations, and nonprofit groups with gross receipt of over 50,000 dollars. Small nonprofit bodies of receipts up to $50,000 must file 990-N (e-postcard) if they want to retain the exempt status.       

Organizations exempt from filing 990s include Churches and religious institutions. If non-profit bodies have subsidiaries, they are also exempt. The nonprofit bodies not yet in the system are also exempt. An organization incorporated as nonprofit in a state but not desirous of federal income tax exemption, that is, if they don’t have a plan to apply for the IRS exemption need not file 990. However, filing of 990 becomes mandatory for them if they intend to avail of exemption. The given time frame in this case is 27 months.   

Filing Form 990 

Form 990 is a fairly simple form. First of all you need to determine the category under which your organization falls, so that you know the relevant form applicable in your case. Accordingly, you may file a 990 or 990EZ as applicable. You have the option to file your return online or print and mail the same to the IRS. A convenient way to file the 990 form by small organizations is to file the e-postcard or 990N. This is easy to complete since it has about eight basic items requiring information relevant to your organization.   

Tax Professionals' Resource