Posted on July 29, 2023

IRS Form 990: A Guide For Nonprofits

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American flag with a IRS form 990 in the foreground

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Fundraising registration is a necessary step for any nonprofit organization seeking to raise funds to support their cause. At the core of the registration process is IRS Form 990. Nonprofit organizations that are tax-exempt under section 501(c)(3) of the US Internal Revenue Code must submit the 990 and register within the state in which they will be soliciting funds in order to be in compliance. This form, along with any required documentation, is used by the IRS to learn more about nonprofits and prevent them from abusing their tax-exempt status. Besides being foundational to compliance, the 990 also allows nonprofits to share information with the public and is a critical component in building trust.

What is the 990?

The 990, also known as the Return of Organization Exempt From Income Tax, originated in 1941 as a means for the IRS to gather information on a charitable organization’s activities and finances. It aims to transparently disclose revenue, expenditure, and income, ensuring compliance with tax-exempt regulations.

All organizations exempt from federal income taxes, such as 501(c)(3) organizations, must file the 990 each fiscal year. Failure to meet this annual requirement can result in penalties varying across states, such as tax-exempt status revocation, lawsuits, and fines up to $25,000. Noncompliance also damages credibility, leading to a loss of donor trust. Hence, nonprofits must take their 990 filing obligations seriously and be aware of their responsibilities.

Variations of the 990

There are generally four types of the 990, including the 990, the 990-EZ, the 990-PF, and the 990-N. The appropriate form to file typically depends on the organization’s financial activity or if you’re a private foundation.

Form 990

The 990 (Return of Organization Exempt From Income Tax) is the full version of the 990 and is used to report the organization’s mission, financial, and engaging activities. This form seeks information on the organization’s revenue streams, expenses, governance practices, and program accomplishments. It is divided into major parts, including a Summary, Governance, Program Accomplishments, Financial Information, and other supporting schedules. All nonprofits that meet the filing requirements must file the 990.

The 990-EZ

The 990-EZ (Short Form Return of Organization Exempt From Income Tax) is a simplified version of the 990. It excludes the governance section, and the financial statements must be attached to the return. Organizations with total assets of $250,000 or less on the last day of their tax year and a gross income of $50,000 or less in their current tax year file the 990-EZ.

The 990-PF

The 990-PF (Return of Private Foundation) is used to report the activities of a private foundation, such as the distribution of grants or charitable contributions. The 990-PF is more comprehensive than the 990, with more detailed questions on private foundations.

The 990-N

The 990-N (e-Postcard) is an electronic version of the 990-N that organizations with annual gross receipts of $50,000 or less can file. The e-Postcard must be filed electronically and provides very limited information about the organization, usually only including the organization’s name, address, and mission. Filing the 990-N provides evidence to prospective donors, members, and others that the organization has complied with IRS filing requirements.

Filing the 990: A Word of Caution

The 990 is a complex document that requires careful thought and consideration with regard to the answers you provide. Providing false or incomplete material could significantly impact your organization’s ability to operate. Although some nonprofits may choose to rely on their accountants to file such documentation, ultimately, it is the nonprofit’s responsibility to ensure complete and accurate information is submitted.

The IRS gives very specific instructions on what they expect to see on the 990 and there are several questions that can raise red flags, depending on how you answer them. For instance, regulators tend to look very closely at Part III which describes the mission and program service accomplishments. Providing nominal or vague information in this section could alert regulators of potential issues regarding the legitimacy or misrepresentation of the nonprofit. Part VIII Statement of Revenue and Part IX Statement of Functional Expenses are also used in a good many state filings, so that if an organization is filing a 990-PF, -N, or EZ, they often need to provide a good amount of supplemental financial information.

The answers that an organization provides on the 990 may trigger the need to submit additional Schedules or supporting documents. For instance, answering “Yes” to lines three, four, or five under Part IV, Checklist of Required Schedules will prompt the need to submit Schedule C, an addendum that is designed to provide regulators with additional information on political campaign and lobbying activities. Overall, there are over a dozen different schedules that, if triggered, can further complicate the administrative process.

Potential Problems and Consequences of Providing Missing or Inaccurate Information

Registering for fundraising, no matter how challenging or inconvenient, is the law and a requirement in every state in which you solicit funds (except for a few that have no fundraising registration requirements at all). Failure to register is detectable through the 990, where organizations must list their registered states. Neglecting registration not only violates the law but also damages the organization’s reputation.

Fundraising registration requirements differ by state. Keeping track of them and staying up to date on any changes requires a great deal of knowledge, research, and most of all, time. If you submit the wrong information, are lacking the required documentation, or miss a deadline, you’ll likely exacerbate an already difficult process. Accuracy is crucial.

When filling out the 990, it’s important to remember that the quality and precision of the information you provide have a direct impact on whether or not your nonprofit will gain or maintain compliance. If you knowingly (or even unknowingly) provide false information, you put your exempt status at risk. At a minimum, providing erroneous or misleading information could cost you time and money when the IRS requires you to refile with the state and pay additional fees.

Alternatively, if you do your due diligence and provide thorough, accurate information about your nonprofit, its mission, members, finances, and activities, then you will reap benefits beyond just gaining compliance. Keep in mind that the 990 is a public document that just about anyone can access. Being completely transparent about a nonprofit that is legitimate, in compliance, and committed to its purpose can increase donor confidence, shows accountability and integrity, and elevates that organization’s reputation.

Simplify the Registration Process with the Help of Affinity Fundraising Registration

Affinity Fundraising Registration offers a streamlined system to simplify the fundraising registration process as a proven and affordable system for managing the heaps of paperwork. It provides three support levels: Independent Registration, Full Support, and Full Support Plus, catering to organizations’ resources and needs.

Independent Registration relies on our Affinity Single Portal® and is a do-it-yourself solution for state charitable solicitation registration, ideal for organizations of any size. It’s perfect for those who have a limited budget and prefer to keep filings in-house. It’s available for 990 and 990-EZ filers, but not presently for 990-N or 990-PF filers.

For those who prefer Affinity to take on the full administrative burden of managing their fundraising registration process, we provide a Full Support third-party filing service that provides customers with complete peace of mind knowing that their registration obligations are being handled by a knowledgeable expert.

If you need additional support that includes expedited service as well as additional registered agent or corporate annual report management, we also offer a Full Support Plus service. It’s ideal for organizations who are experiencing a recent change of staff, are undergoing a relocation, or have multiple branches or chapters in different states.

If you would like more information about our services or to request an estimate, please send us an email or fill out our online form.

To learn more about nonprofit compliance and the 990, please visit the IRS website. Or, for helpful resources including links to state-specific fundraising registration requirements, visit the Affinity fundraising registration resources page.

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