Understanding the 990 Tax Form for Non-profit Organizations [Video]

A critical financial literacy term for all executives of non-profit organizations to know is the 990 form, a tax return that all nonprofits have to file. This informational tax form helps the IRS determine if you can maintain your tax-exempt status, and provides the public with financial and organizational information. Today, we cover the who, what, where, when, why, and how of filing the 990 form. Watch today’s Monday Money Moments video for more (and skim the transcript below).

Dana Miller (00:01): Hello, welcome to Monday Money Moments with myself, your host, Dana Miller of Executive Financial Insights. Today, we are talking about financial literacy and the 990, a tax return that all nonprofits have to file.

(00:20): First of all, let me say, I am a CPA. No, I am not a tax CPA. No advice is given here. No advice is intended here. This is just a who, what, when, where, how, and why we would even do a tax return when we are a not-for-profit, basically a tax free organization. Right?

The purpose of a 990: the 990 is an informational tax form that most tax-exempt organizations file. It provides the public with financial and some organizational information about the nonprofit organization. There are other ways to do this as well, but the 990 is a required annual form that needs to be filed.

(01:11): It also helps the IRS determine if the activities that you’re engaged in are truly not-for-profit worthy, and if you can maintain your tax-exempt status.

So, what information does a reader of a 990 look for and look at? What are some of the things they can see? Everyone is different, of course, but some of the big things, right on the very first page: They can see what type of not-for-profit you are: 501c3; c6; c4; etc. How much revenue, expenses, and net assets were generated at the very high level in your organization.

Part one also shows the sources of revenues and the major categories of expenses, programs, fundraising, and management costs.

(02:05): Part three shows your organizational accomplishments, and to be honest, this is a terrific opportunity for you to brag. There are no prescribed ways for you to say how well you did this year. You just have to put on what revenues you generated, and what expenses you had; but, what did you accomplish with that? Part three is where you get to do that, so that’s awesome.

(02:31): Part five talks about who your board is and who the top earners in the company are, if they’re earning over a hundred thousand dollars. That is if your board is paid. Most board members are not paid, but some are. So, any remuneration to the board shows up in this area.

(02:53): Part six is all the affirmation. This includes questions about your organization, your governing body, rules that you’re following, making sure that you do or do not have international investments, all of these types of questions. Answers to these questions will generate additional schedules in the 990.

(03:22): Schedule A also approaches questions on self-dealing and conflicts of interest. These are monitored by state regulatory and the IRS bodies to ensure that you’re not using the nonprofit for personal gain, which of course you’re not doing that. You shouldn’t be doing it, it’s just for the public gain. That’s why you’re not-for-profit. You’re not taxed because the public is benefiting from what you’re doing.

(03:48): You are allowed to have lobbying, you just have to report on some of the lobbying. It is limited, right? You’re not supposed to be a lobbying organization as a 501c3, but you are allowed to lobby.

(04:04): Who can prepare a 990? CPAs can for sure. Your auditors, who are also CPAs, can. It can also be prepared internally as well. I would recommend using an external tax preparing service. It will save you a lot of time and headache because the return is not a super simple return to prepare. It is due the 15th day of the 5th month following your year end. For most of us with a December 31st calendar year end, it’s due May 15th. Just remember that.

(04:44): Depending on your dollar volume, if you have smaller revenues, you can file a 990-EZ, and you can file a 990 short form. Most nonprofits do file the long form 990, if they’re large enough. If you don’t file a 990, you can get in trouble with the IRS. After three years they can revoke your nonprofit status, so just be careful of that. You want to make sure that you are filing it every year. They do have a suggestion for you as well: post your 990 and your return on your website because it’s a very forward transparency move that helps donors and the public. They will have access to this information anyway but be preemptive about it by putting it out there for them.

(05:42): That’s what I have for you today. That is www.executivefinancialinsights.com. We’ll talk to you next week. Thank you.

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