Form 990 is the annual tax return that nonprofit organizations must file with the Internal Revenue Service (IRS). This filing is essential for maintaining compliance and demonstrating financial transparency. It provides the IRS, donors, and the public with insights into your organization’s operations, governance, and financial management.
But what exactly is Form 990, why is it important, and how can you file it efficiently? Let’s break it down.
What is Form 990?
Form 990 is an informational tax return that tax-exempt organizations must file with the IRS each year. While businesses file tax returns to calculate and pay taxes, nonprofits file Form 990 to:
- Report financial activities and confirm tax-exempt eligibility
- Demonstrate compliance with IRS regulations
- Provide financial transparency for donors, funders, and watchdog organizations
Since Form 990 is public record, it’s not just the IRS that reviews it—potential supporters, major donors, and grant funders use it to assess an organization’s financial health and governance.
Do You Have to File Form 990?
The IRS requires most tax-exempt organizations to file some form of the Form 990. The one you will need to file depends upon your financial activities:
Form 990-N (e-Postcard)
GROSS RECEIPTS OF $50,000 OR LESS
Form 990-EZ
GROSS RECEIPTS LESS THAN $200,000, TOTAL ASSETS $500,000 OR LESS
Form 990
GROSS RECEIPTS MORE THAN $200,000, TOTAL ASSETS More than $500,000
Form 990-PF
REQUIRED FOR PRIVATE FOUNDATIONS, WHATEVER LEVEL THE INCOME
If your organization receives less than $50,000, then you only need to file 990-N (e-Postcard), an easier online filing.
Why Filing Form 990 Matters
Beyond meeting IRS regulations, filing Form 990 offers multiple benefits:
Preserves Tax-Exempt Status – Failure to file for three consecutive years results in automatic revocation of tax-exempt status.
Builds Donor & Funder Trust – Many donors and grantmakers review Form 990 before deciding whether to contribute.
Demonstrates Mission Impact – A well-prepared Form 990 highlights your nonprofit’s achievements and financial responsibility.
Enhances Transparency & Credibility – Since Form 990 is public, it assures stakeholders that your organization is well-managed.
Avoids IRS Penalties – Late or inaccurate filings can lead to financial penalties and increased IRS scrutiny.
Would donors feel confident supporting an organization that lacks transparency? A strong Form.
How to File Form 990 (Step-by-Step)
Filing Form 990 is manageable when broken into simple steps:
Step 1: Gather Financial Documents
- Donation and grant records
- Revenue from other sources
- Expenses, including salaries and overhead
- List of board members and key employees
- Last year’s Form 990 (if applicable)
Step 2: Determine the Right Form
Refer to the Form 990 filing table above and select the appropriate version based on your nonprofit’s revenue and assets.
Step 3: Complete the Form
Many nonprofits use accounting software or a CPA to ensure accuracy. If preparing it yourself, carefully review each section.
Step 4: E-File with the IRS
The IRS requires all Form 990s to be filed electronically using IRS-approved software or a tax preparer.
Step 5: File Before the Deadline
For most nonprofits, Form 990 is due May 15 (the 15th day of the 5th month after your fiscal year ends). If you need more time, file Form 8868 for an automatic 6-month extension.
Common Mistakes to Avoid
Mistakes can cost you in penalties or an IRS audit. Here’s what to watch out for:
- Filing the wrong form – Select the proper version depending on your business size.
- Missing the deadline – Filing late brings fines and the possible loss of tax-exempt status.
- Incorrect financial information – Double-check the numbers before filing.
- Vague program descriptions – Clearly explain how your nonprofit serves the public.
- Failure to report key personnel – Identify all the board members and executives required to be reported.
- How much confidence do you have that your nonprofit’s financial records are accurate? Would you trust an organization with incomplete or misleading data
How the Public Uses Form 990
Do you know that Form 990 is public information? Anyone can get access to it via websites such as GuideStar and Charity Navigator. Donors and grantmakers often analyze these reports before deciding where to commit their funds.
A well-prepared Form 990 helps build credibility. A poorly completed one raises suspicions about financial management. What message does your Form 990 convey to potential supporters?
Filing Form 990 is essential to your nonprofits tax-exempt status earning donor trust and demonstrating transparency. Staying ahead of deadlines and keeping accurate records makes the process easier.
How Donors Use Form 990
Did you know? Form 990 is publicly available on websites like GuideStar and Charity Navigator.
- Major donors and grantmakers analyze Form 990 before deciding where to allocate funds.
- Charity watchdogs rate nonprofits based on financial transparency and governance.
- The general public can review your nonprofit’s spending and program effectiveness.
- A well-prepared Form 990 builds confidence—an incomplete one raises red flags.
Frequently Asked Questions (FAQ)
1. What happens if my nonprofit fails to file Form 990?
If a nonprofit fails to file for three consecutive years, the IRS automatically revokes tax-exempt status. To reinstate it, you must file a new exemption application and pay penalties.
2. Can I amend my Form 990 if I make a mistake?
Yes! If you discover an error after filing, you can submit an amended Form 990 by checking the “Amended Return” box and attaching an explanation of the changes.
3. What if my nonprofit has no revenue this year?
Even if your nonprofit had no financial activity, you still must file Form 990-N (e-Postcard) to remain compliant.
4. How long does it take to complete Form 990?
The time required depends on the complexity of your finances. For small nonprofits, it may take a few hours, while larger organizations with complex financials may need several weeks.
5. Should my nonprofit hire a CPA to file Form 990?
If your nonprofit is small with simple finances, you may handle it internally. However, for organizations with grants, multiple revenue streams, or large budgets, working with a nonprofit CPA can help ensure compliance and accuracy.
