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The IRS Form 990: What Nonprofits Need to Know

Posted by Tom Hallissey on Feb 8, 2017 10:00:00 AM

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Even though they don’t pay direct taxes, the IRS keeps a watchful eye over nonprofits, too. Charities and other similar organizations are required to file a Form 990, which details their financial activities.

What is the IRS Form 990?

The IRS Form 990 is a tax form that most tax-exempt organizations file on an annual basis. It gives the government an overview of a nonprofit’s activities, governance and finances.

In the document, an organization may also highlight their accomplishments in order to maintain their tax-exempt status.

The official IRS form is due on the 15th day of the fifth month after a nonprofit’s tax year ends.

Who must File

501(c)3 and other tax-exempt organizations which have gross receipts of more than $200,000 or assets valued over $500,000 are required to file a Form 990 annually. Some political organizations, churches and other religious organizations, may be granted an exemption.

An organization which fails to file for three consecutive years automatically loses its nonprofit status.

3 Things you Need to Know Before Filing

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1)      Revenue and Expenses

A Form 990 must include a disclosure of all revenues, expenses, assets and liabilities. In addition, a nonprofit needs to detail all of its contributions.

On this document, nonprofits must separate revenue into these three categories:

  • Program-related revenue
  • Unrelated business revenue that is subject to tax
  • Related revenue that is excluded from tax

2)      Compensation Disclosures

The IRS also requires nonprofits to disclose the total compensation for officers, directors, trustees and other highly compensated individuals.

This accounting disclosure includes:

  • Salary
  • Taxable fringe benefits
  • Nontaxable fringe benefits, including insurance
  • Deferred compensation, such as a yearly bonus

Over-compensation may put a nonprofit’s tax-exempt status into jeopardy.

3)      Policies and Procedures

The form also asks nonprofits to disclose their policies and procedures, including how they address conflicts of interest and compensation. A tax-exempt organization must also detail their mission or other central activities. This information is a consideration in the IRS’ continuance of an organization’s nonprofit status.

If you have other questions about nonprofit accounting, contact a tax preparer today.

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