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Five Things Nonprofits Should Know About: IRS Form 990November 11, 2014
Please note that the term “nonprofit” as used here specifically means entities that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code.
- The 990 is more than a financial reporting form. The IRS Form 990 is an annual reporting form that tax-exempt nonprofit organizations must file. In addition to certain financial information regarding a nonprofit organization, the current 990 also asks questions about other characteristics such as governance, policies, procedures, compensation, mission, and other activities.
- Many people, internally and externally, are interested in the 990. The 990 is a publicly-available document and many stakeholders turn to the form for key information about a nonprofit organization. For example, potential donors may review an organization’s 990 to get a sense of its financial condition and charitable efforts. It is therefore important that a broad cross-section of the organization, including development personnel and not just the financial team, review the 990 to be sure that the form paints a picture of the organization that is positive, accurate, and consistent with the way the organization is presented elsewhere.
- The instructions matter. Answering 990 questions, even those that seem straightforward, without reading the corresponding IRS instructions can easily lead to many incorrect answers and inaccurate reporting. Penalties may be imposed where a 990 contains incorrect information (see additional information below regarding penalties).
- Certain portions of the form do not need to be publicly disclosed. Private donor information is included on the 990 filed with the IRS but can generally be excluded from public copies of the form. For additional information regarding public disclosure obligations, please see Five Things Nonprofits Should Know About: Mandatory Disclosure of Documents.
- Failure to file can result in significant penalties and even revocation of exempt status. An organization that does not file, or files late, may be liable for significant penalties for each day that the form is not filed. If a 990 is not timely filed, or does not contain correct information, the responsible person or people at the organization may also face penalties personally. The IRS may also seek to revoke the exempt status of the organization, and generally will automatically revoke exempt status if the organization fails to file the Form 990 for three consecutive years.
For additional information, please contact us.