Nonprofit Form 990 Filing: An Essential Tax Guide

Nonprofit Form 990 Filing: FAQ Guide + How to Get Started

If your nonprofit has a valid 501(c)(3) status, that means you’re exempt from paying federal income tax, as well as most state taxes. However, this doesn’t mean you can sit back and relax come tax season!

To maintain tax-exempt status, nonprofits like yours still have to file an annual tax return via IRS Form 990. In this guide, you’ll learn all you need to know about Form 990 filing for nonprofits like yours. We’ll cover the following topics:

Rather than determining the taxes your organization owes to the federal government, Form 990 demonstrates that you’re handling funds properly and have sound financial management practices in place. Let’s dive in!

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Nonprofit Form 990 FAQ

Filing your nonprofit’s Form 990 might seem complicated or confusing at first, so let’s walk through the answers to some of the most common questions about this document.

What is Form 990?

Form 990 is the tax return document that tax-exempt organizations complete each year and file with the IRS. The IRS uses this form to make sure your nonprofit is legitimate and that you’re being financially honest, which tells them whether you deserve to maintain your tax-exempt status. While the IRS often updates the Form 990 from year to year, yours will probably look something like this example:

The top part of a blank example of a nonprofit Form 990.

Does My Nonprofit Also File State Tax Returns?

Each state government has slightly different tax requirements for nonprofits that operate in that state. For example, New York requires nonprofits to file Form CHAR500 (Charities Annual Filing) with the state government to maintain their state tax exemption and charitable solicitation registration. However, some states will accept a copy of an organization’s Form 990 or annual report to fulfill these purposes. The IRS website links out to the requirements necessary for each state so that your organization can stay up to date on your specific tax form requirements.

Which Version of Form 990 Should I File?

There are four versions of Form 990, and the one your organization files depends on your annual gross receipts and total assets. In general, the larger your nonprofit is, the longer your Form 990 will be so that you can report all of your financial activities.

Here is a breakdown of the four Form 990 versions and their respective filing requirements:

Four Form 990 versions
  • Form 990-N (e-postcard): Your nonprofit can file this form if your gross receipts total less than $50,000. Form 990-N is an eight-question online form that asks for your organization’s employer identification number (EIN), tax year, legal name and address, name and address of the principal officer, website URL, and a confirmation of gross receipts under $50,000.
  • Form 990-EZ: Your organization can file this form if your gross receipts are less than $200,000 and your total assets equal less than $500,000. Form 990-EZ is a condensed version of the full Form 990 and is about four pages long when printed.
  • Full Form 990: Your nonprofit has to file the complete 12-page nonprofit tax return if your gross receipts total $200,000 or more or if your total assets equal $500,000 or more. Make sure to use your total assets in this calculation rather than your net assets, as your total assets will almost always be a larger number.
  • Form 990-PF: All private foundations must file the 13-page Form 990-PF, regardless of their total assets or gross receipts. This is because the IRS requests additional, consistent information on your foundation’s private assets, trustees, officers, grants awarded, and other financial activities to ensure you’re allocating funds properly.

Your nonprofit can save time and resources by ensuring that you’re filing the right size form for your organization. If you’re unsure about which form to file or how to file that form, reach out to a nonprofit accountant. They’ll be able to help you not only determine the correct form, but also file your forms for you!

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When is the Form 990 Filing Deadline?

Your nonprofit’s Form 990 is due on the 15th day of the fifth month after the end of your fiscal year. For most nonprofits, whose fiscal year follows the calendar year, your tax forms are due on May 15.

If for some reason, your nonprofit can’t make its Form 990 filing deadline, you can apply for an extension by filing Form 8868. If approved, your new deadline will be November 15 if you use the calendar fiscal year.

If My Nonprofit is Conducting an Independent Audit, What Do I Do About My Form 990?

If your nonprofit is planning to undergo an independent financial audit, we recommend doing so before completing your Form 990 filing. This is because you’ll need to update your Form 990 with the details of the audit before submitting it. Consider filing for an extension to ensure you still get your tax return in on time.

Collecting financial documentation for your audit also helps your organization pull together everything that you’ll need to file your Form 990, such as your chart of accounts and financial statements. Make sure all of your audit resources are easily accessible so you can reference them later.

Note: An independent financial audit is different from an audit conducted by the IRS, which can be triggered if there is a problem with your Form 990 but is less common for nonprofits than for individuals and for-profit organizations.

What Happens if I File My Form 990 Late?

If you don’t apply for an official extension to your Form 990 deadline using Form 8868 or provide reasonable cause for filing late as defined by the IRS, your nonprofit may be subject to penalties and fees. Generally, these penalties are as follows:

  • If your gross receipts are less than $1,208,500 for the tax year, the penalty is $20 per day that the return is late. The maximum penalty is either $12,000 or 5% of your organization’s gross receipts, whichever is less.
  • If your gross receipts are greater than $1,208,500 for the tax year, the penalty is $120 per day that the return is late. The maximum penalty in this case is $60,000.
If your nonprofit fails to file Form 990 for three years in a row, you run the risk of your 501(c)(3) status being revoked. If this happens, your nonprofit will need to file Form 1023 again and pay additional fees to re-register as a tax-exempt organization.

Who has Access to My Nonprofit’s Form 990?

All Form 990s are required to be publicly available for at least three years after filing, meaning anyone can find the information on your forms once the IRS publishes them. Therefore, be careful not to include sensitive information as a part of your forms. For example, the IRS specifies that you shouldn’t include Social Security numbers on these forms due to concerns around (and past incidents of) identity theft.

Some companies, like Guidestar, use Form 990s to provide donors with additional information about the nonprofits they’re interested in supporting. Your nonprofit can choose to register with Guidestar to make this information more easily accessible and increase transparency with your supporters. Additionally, you can publish your Form 990 on your organization’s website and include data from it in your annual report so it’s even easier for interested donors to find.

Why Form 990 Filing is Important

Your Form 990 is arguably the most essential financial report you compile each year. There are many reasons to take this process seriously and treat it with care, including that:

Four reasons why nonprofit Form 990 filing is important
  • It allows you to maintain your nonprofit’s status. As discussed previously, filing a Form 990 each year is essential for keeping your nonprofit’s 501(c)(3) registration. Plus, avoiding the penalties for failing to file is good for your organization’s financial health.
  • It holds your organization accountable. Filing taxes each year is a good opportunity to regularly review your organization’s financial information and identify strengths and areas for improvement.
  • It promotes financial transparency. Because Form 990s are public records, nonprofit supporters can gain valuable information when they look up your past tax forms. This can instill confidence in them and even convince potential donors to support your organization.
  • It proves your nonprofit’s integrity. Unfortunately, nonprofits have historically been used to cover up fraudulent actions (see Nonprofit Quarterly’s coverage of the Key Worldwide Foundation incident). Carefully preparing your Form 990 not only shows that your organization is acting honestly but also can be helpful in uncovering unintentional mistakes that could risk your organization’s reputation if left unchecked.

Accurately and effectively filing your nonprofit tax returns is essential for effective financial planning. Check your work carefully and enlist professional help to maximize these benefits and prevent tax-related risks for your organization.

How to File Your Nonprofit’s Form 990

There are two different ways you can go about completing your Form 990: filing on your own or working with an accountant. Filing on your own is possible, but if your leaders don’t have a background in accounting, it can be challenging to keep up with changes in the tax system and resolve issues that may come up during the process. If you choose this method, you should also note that all nonprofit tax returns now have to be filed electronically (until 2019, this was only a requirement for Form 990-N).

The best way to make sure all documentation is collected and analyzed properly each year is to hire an accountant who has experience working with nonprofits. Since bringing on a new full-time staff member is expensive and time-consuming, many organizations instead choose to outsource their tax preparation and other accounting needs. If you choose this option, look for an accounting firm that offers:

Three considerations for hiring an accountant for nonprofit Form 990 filing
  • A flat-rate pricing model. Ensure there are no hidden fees or expenses included in the accountant’s price so you can stay within your budget.
  • Experience working with similar organizations. Besides specializing in nonprofit work, your accountant’s past clients should be comparable in size and mission so that they’ll have ample experience and expertise to help your organization.
  • Positive reviews and recommendations. Read online reviews and reach out to other organizations in your network to see if they’ve worked with or know of your accountant. If the reviews are generally positive, you can likely count on a good experience working with that professional.

We may be a little biased, but we recommend Jitasa as the best nonprofit accounting firm to file your organization’s Form 990. Our experts have filed more than 4,000 tax returns for nonprofits of all sizes and types, meaning they have experience with many different financial situations and can meet your organization’s unique needs—all at an affordable flat rate.

Form 990 filing is an unavoidable part of being a financially responsible nonprofit. Learning about your Form 990 is the first step to a successful tax season. The next step will be completing the form, which is much easier when you partner with a nonprofit accounting firm like Jitasa.

For more information on nonprofit taxes and related accounting topics, check out these resources:

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