Comprehensive Guide to Form 990: Instructions, Schedules, and Filing Requirements

Form 990 is the tax document that most tax-exempt organizations must file annually with the IRS. This comprehensive guide provides step-by-step Form 990 instructions, helping your nonprofit:

• Avoid common filing mistakes that could trigger IRS scrutiny
• Meet all compliance requirements to maintain tax-exempt status
• Complete each section accurately with examples and explanations
• Understand electronic filing requirements and deadlines

Whether you’re filing Form 990 for the first time or looking to improve your organization’s filing process, this guide will walk you through everything you need to know about Form 990 for nonprofits.

Topics in this Guide

How this connects to your financial statements

• Financial Reporting: Complete Guide
• Statement of Activities
• Statement of Financial Position
• Statement of Functional Expenses
• Nonprofit Audit

What is IRS Form 990?

Form 990 is an annual reporting return that most federally tax-exempt organizations must file with the IRS. It provides information on the organization’s finances, programs, and governance. The Form 990 is also the main source of information on the activities of nonprofits, promoting transparency and compliance with tax laws using compliant nonprofit accounting.

Used by government agencies, it prevents organizations from abusing their tax-exempt status. It outlines accomplishments in the previous year to justify maintaining your tax-exempt status.

Public access provides an easy way for donors and other funding sources to evaluate the transparency of the organization. If filled out correctly and completely, the organization can present its mission and achievements in a favorable light.

Purpose of Form 990

The primary purpose of Form 990 is to determine whether an organization is operating for a charitable purpose and complying with tax laws. Government agencies use it to prevent organizations from abusing their tax-exempt status. The form outlines accomplishments in the previous tax year to justify maintaining tax-exempt status.

Form 990 also serves as a tool for public inspection, providing an easy way for donors and other funding sources to evaluate the transparency and financial health of the organization. If filled out correctly and completely, the organization can present its mission and achievements in a favorable light.

Why is Form 990 Important?

Form 990 collects crucial information about tax-exempt organizations, including:

• Income and revenue streams
• Expenses and functional expenses
• Activities and program service accomplishments
• Governance structure
• Compensation of key employees

This important document allows the IRS to monitor the activities and financial health of organizations, ensuring compliance with applicable laws and regulations. By filing Form 990, organizations demonstrate transparency and accountability to the public, providing valuable information to the IRS, state regulators, and potential donors.

An organization can clarify its mission on the 990 and detail its accomplishments of the previous tax year. Donors can find out where the group gets its revenue, while foundations can assess the charity’s sustainability. Potential employees can review how well the nonprofit compensates its top employees.

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What are the Form 990 filing requirements?

Tax-exempt organizations, nonexempt charitable trusts, and section 527 political organizations use Form 990 to report their financial details to the Internal Revenue Service (IRS). They need to file this form to meet the requirements of section 6033.

Form 990 filing requirements include providing information such as:

• The organization’s legal name and mailing address
• Name and address of a principal officer
• Website address (if applicable)
• Confirmation that the organization’s annual gross receipts are $50,000 or less (for Form 990-N filers)

Form 990 determines the tax-exempt status of the organization and the amount of public support it receives. Additionally, Schedule L of Form 990 reports certain financial transactions or arrangements between the organization and disqualified persons or other interested parties.

How Form 990 Adds Value for the Organization and its Supporters

The IRS Form 990 is a filing requirement for all section 501(c)(3) organizations. The form provides the public with information about the organization’s finances and operations, allowing donors to see how their contributions are used.

Recent revisions to Form 990 have added even more information, such as:

• Disclosure of possible conflicts of interest
• Board member and staff compensation details
• Additional information on accountability and fraud prevention measures

Latest revisions of the 990 have added even more information such as disclosing possible conflicts of interest, board member and staff compensation, and additional details about accountability and the prevention of fraud.

Types of Form 990

There are four different types of Form 990, each designed for organizations of different sizes and types:

1. Form 990-N (e-Postcard): For small nonprofits with gross receipts of $50,000 or less
2. Form 990-EZ: For nonprofits with gross receipts less than $200,000 and total assets less than $500,000
3. Form 990: For larger organizations with gross receipts of $200,000 or more, or total assets of $500,000 or more
4. Form 990-PF: For private foundations, regardless of financial status

Who must file IRS Form 990?

• All private foundations file Form 990-PF.
• Tax-exempt organizations with gross receipts of $200,000 or assets worth $500,000 file the Form 990.
• Nonprofits with gross receipts of less than $200,000 but more than $50,000 file Form 990 or 990-EZ.
• Small nonprofits with gross receipts of $50,000 or less file the 990N (e-Postcard) in order to keep their exempt status.
• Any organization that is tax exempt under Sections 501c, 527, or 4947(a)(1) of the US tax code, and do not qualify for exemptions.

Who is exempt from filing Form 990?

• Churches and faith-based organizations such as religious schools, missions or missionary organizations are exempt from filing Form 990.
• Subsidiaries of other nonprofits, if the parent group files.
• Nonprofits who are not registered yet, such as an incorporated nonprofit, or an incorporated nonprofit not planning to apply to the IRS for exemption from federal income tax.

If your organization is applying for tax-exempt status, you must file the correct Form 990 within 27 months of incorporation, even without a determination.

• State institutions that provide essential services such as a university are exempt from filing.
• Government corporations are also exempt.

When to File Form 990?

You must file Form 990 on or before the 15th day of the fifth month following the end of your tax year. For example, if your fiscal year ends on December 31, the Form 990 is due on May 15 of the following year. Form 990-N (e-Postcard) filers are the only exception to the rule that allows two 90-day extensions.

How to File Form 990?

As of July 1, 2019, legislation requires tax exempt organizations to e-file forms. The mandate includes the following:

• Form 990, Return of Organization Exempt from Income Tax
• Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation
• Form 8872, Political Organization Report of Contributions and Expenditures
• Form 1065, U.S. Return of Partnership Income (if filed by a Section 501(d) apostolic organization)

Form 990-EZ – For tax years ending before July 31, 2021, the IRS will accept either paper or electronic file.

Forms 990-T and 4720 – In 2020, the IRS will continue of accept paper forms pending conversion into electronic form. The IRS plans to have these returns ready for e-filing in 2021 reporting on tax year 2020.

What Happens if a Nonprofit Does Not File Form 990?

The IRS will automatically revoke your tax-exempt status if you don’t file the appropriate Form 990 for three consecutive years. Keep in mind that if you lose your exempt status for not filing, there is no appeal process with the IRS. Your nonprofit may have to pay income taxes, user fees, and file additional paperwork to regain tax-exempt status.

To remain compliant with IRS regulations, organizations must also provide the public with copies of their Form 990 and other disclosures for public inspection. Failure to do so can result in additional consequences and penalties.

Form 990 Filing Instructions

Due to the complexity involved in form 990 filing instructions, it is important to review the criteria and each part individually.

Criteria for Filing Form 990

• If your gross revenue is less than $50,000 you have the option of filing a shorter alternative form called the 990-N. Form 990-N is referred to as an “e-postcard” since it can only be filed online, does not include a detailed financial report and only requires minimal information.
• If your gross revenue is less than $200,000 and your assets are less than $500,000, you have the option of filing a 990-EZ. The 990-EZ form includes reporting on revenue, expenses and changes to net assets, along with summary balance sheet data, but does not require the breakdown of expenses by functional area.
• If your gross revenue is greater than $200,000, or you have assets greater than $500,000 you must complete the Form 990.

Step-By-Step Instructions for Preparing Form 990

1. Determine if your organization needs to file Form 990
2. Collect all required information, including financial statements and program service accomplishments
3. Review the Form 990 instructions carefully
4. Complete each section and schedule as required
5. Use accounting software or consult a tax professional if needed
6. Review the completed form for accuracy and completeness

Step 1: Determine if your organization needs to file Form 990

The first step in filing Form 990 is determining whether your organization needs to file it. Generally, organizations exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code must file Form 990. However, there are exceptions for certain small organizations and churches.

Step 2: Collect all required information, including financial statements and program service accomplishments

After determining that your organization needs to file, the next step is to collect all the required information. This includes financial information such as income, expenses, and assets, as well as information about the organization’s governance, activities, and compensation of key employees. It is important to have accurate and complete information when filing the Form 990, as the IRS may audit organizations that file incomplete or inaccurate returns.

Step 3: Review the Form 990 instructions carefully

When preparing to file the Form 990, it is also important to review the instructions for the form. The instructions offer detailed guidance on what information you need to report and how to do so. It is important to follow the instructions carefully, as failure to do so can lead to errors and potential penalties.

Step 4: Complete each section and schedule as required

The Form 990 has several different schedules and sections, each with its own instructions and requirements. The schedules include information on the organization’s income, expenses, assets, and liabilities. The sections include information on the organization’s governance, activities, and compensation of key employees. You should review the instructions for each schedule and section to make sure you include and report all the necessary information correctly.

Step 5: Use accounting software or consult a tax professional if needed 

Once you have gathered all the necessary information and reviewed the instructions, the next step is to complete the Form 990. We recommend using a computer to complete the form, as it makes making changes and corrections easier. There are also software programs available that can help to prepare the Form 990.

Step 6: Review the completed form for accuracy and completeness

Once you complete the Form 990, carefully review it for accuracy and completeness. Make sure to double-check all the information for correctness and have an authorized representative of the organization sign the form.

Form 990 Electronic Filing Requirements

As of tax year 2020, all Form 990 filers must submit their returns electronically due to the Taxpayer First Act. This requirement applies to Form 990, 990-EZ, 990-PF, and 990-T.

Key E-Filing Information

• Implementation Timeline: The e-filing mandate took effect for tax years beginning after July 1, 2019
• No Paper Option: The IRS no longer accepts paper filings of Form 990 series returns
• Limited Exceptions: Some organizations in areas without internet access may qualify for hardship exceptions

E-filing offers several advantages including faster processing, fewer errors, and immediate confirmation of receipt.

E-Filing Process

1. Select an Authorized E-file Provider – Choose from IRS-approved software providers or use a tax professional
2. Prepare Your Form 990 – Complete all required information and schedules
3. Submit for E-filing – Transmit your return through the authorized e-file provider
4. Receive Acknowledgment – The IRS will send confirmation of receipt within 24-48 hours

Benefits of E-Filing

• Faster processing times
• Immediate confirmation of receipt
• Reduced errors through validation checks
• Environmentally friendly

Overview of Form 990

Form 990 includes several key sections and schedules:

• Part I: Summary of revenue, expenses, and changes in net assets
• Part II: Signature block
• Part III: Statement of program service accomplishments
• Part IV: Checklist of required schedules
• Parts V-VI: Other IRS filings, governance, and policies
• Part VII: Compensation of officers, directors, and key employees
• Part VIII: Statement of revenue
• Part IX: Statement of functional expenses
• Part X: Balance sheet
• Part XI: Reconciliation of net assets
• Part XII: Financial statements and reporting

Income from all sources (both taxable and tax-exempt).

The revenue section, detailed in Part VIII lists revenue by the following three categories:

1. Contributions, Gifts and Grants
   • Federated campaigns – Contributions received through federated fund raising, campaigns such as the United Way, and revenue received from affiliated organizations.
   • Membership dues – Revenue received from members dues
   • Fundraising events – Revenue that is generated from attendance at fund-raising events, such as ticket sales, sponsorship, raffle proceeds.
   • Related organizations – Revenue received from related or affiliated organizations.
   • Government grants (contributions) – Contributions from federal, state or local governments that are considered to provide a direct benefit to the general public. These contributions are distinct from monies received from government contracts or fees for services, which are included in Program Service Revenue.
   • All other contributions, gifts, grants – Contributions received directly from individuals and foundations.
2. Program Service Revenue
   • Program Service Revenue – Revenues received by an organization while charging for the services for which it received tax-exemption.
3. Other Revenue
   • This category includes revenue streams such as: investment income, rental income, sales of inventory, assets, gaming activities and other special fund raising net income.

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Expenses (both direct and indirect)

Part IX details expenses from the Statement of Functional Expenses. Here, you must segregate your expenses into three categories: Program Service, Management and General, and Fundraising. Make sure your accounting includes a functional expense reporting system for easily segregating expense activity by functional area.

• Program Services Expenses – Expenses incurred by an organization while performing its tax-exempt activities.
• Management and General Expenses – Expenses related to the day-to-day operation of an organization. Included are items such as personnel, accounting, and legal services, general insurance, and office management.
• Fundraising Expenses – Costs of soliciting the contributions reported on the Direct Public Support, Indirect Public Support and Government Contributions revenue lines.

Balance Sheet

Part X provides details of an organization’s assets, liabilities, and net assets. The Net Asset section is divided into two categories:

1. Net Assets Without Donor Restrictions
2. Net Assets With Donor Restrictions

This section of the 990 requires the proper accounting software tools to enable you to segregate your net asset balances into these categories for proper 990 reporting.

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Form 990 Required Schedules

Schedule	Required For	Key Information Needed
Schedule A	All 501(c)(3) organizations	Public charity status and public support
Schedule B	Organizations receiving contributions over $5,000	List of contributors
Schedule C	Organizations with political activities or lobbying	Political campaign and lobbying activities
Schedule D	Organizations with certain assets or activities	Supplemental financial statements
Schedule E	Schools	Information on educational policies
Schedule F	Organizations with foreign activities	Activities outside the United States
Schedule G	Organizations with fundraising or gaming	Fundraising or gaming activities
Schedule H	Hospitals	Hospital facilities and activities
Schedule I	Organizations awarding grants	Grants and assistance to organizations
Schedule J	Organizations with high compensation	Compensation information
Schedule K	Organizations with tax-exempt bonds	Tax-exempt bond issues
Schedule L	Organizations with interested persons	Transactions with interested persons
Schedule M	Organizations receiving non-cash contributions	Non-cash contributions
Schedule N	Organizations liquidating or terminating	Liquidation or termination
Schedule O	All organizations	Supplemental information
Schedule R	Organizations with related entities	Related organizations

Failing to include required schedules can result in penalties and may be considered an incomplete return. Be sure to review each schedule’s requirements carefully to determine which apply to your organization.

Schedule A Instructions and Requirements

Schedule A is required for all section 501(c)(3) organizations and provides information about the organization’s public charity status and public support.

Key sections of Schedule A include:

1. Reason for Public Charity Status
2. Support Schedule for Organizations Described in Sections 170(b)(1)(A)(iv) and 170(b)(1)(A)(vi)
3. Support Schedule for Organizations Described in Section 509(a)(2)
4. Supporting Organizations

Common Form 990 Filing Mistakes

To ensure compliance and avoid IRS scrutiny, be aware of these common Form 990 filing mistakes:

1. Misclassification of expenses between program services, management/general, and fundraising
2. Incomplete schedule information
3. Inconsistencies between different parts of the form
4. Failure to report unrelated business income on Form 990-T
5. Incorrect reporting of compensation

Where to view Form 990?

Nonprofits must make their 990 and exemption application available to the public. You can find any nonprofit’s 990 by visiting the IRS website and searching by name. You also may be able to view it by visiting the nonprofit or their website. In addition to this, you may be able to view 990s at websites like Guidestar.

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Bottom Line

A nonprofit’s Form 990 provides valuable information for donors, grantors, and the general public. Since Form 990 is a public document and widely available, nonprofits should be diligent about completing it accurately and filing on time.

It’s crucial for nonprofits to follow the IRS Form 990 instructions and requirements to correctly disclose their financial information and maintain compliance. Consider using accounting software designed for nonprofits or consulting with a tax professional experienced in nonprofit accounting to ensure accurate and timely filing.

Remember, failure to file the appropriate Form 990 for three consecutive years can result in automatic revocation of your organization’s tax-exempt status. Stay informed about your filing obligations and state reporting requirements to maintain good standing with the IRS and state regulators.

Frequently Asked Questions (FAQs)

1. What is Form 990?

IRS Form 990 is an annual reporting return that most federally tax-exempt organizations must file with the IRS. It provides the IRS with information about the organization’s activities, governance, revenues, expenses, and other financial information. The form is also available for public disclosure, promoting transparency within the organization.

2. Who is required to file Form 990?

Tax-exempt organizations, nonexempt charitable trusts, and section 527 political organizations are typically required to file IRS Form 990. However, the specific form to file (990, 990-EZ, 990-N, or 990-PF) depends on the organization’s gross receipts and total assets.

3. How can I accurately complete the 990?

Completing IRS Form 990 requires careful attention to detail and an understanding of the organization’s financial situation. It’s crucial to review the instructions for each schedule and section of the form. Consider using accounting software or consulting a tax professional to ensure accurate completion.

4. Are there any organizations exempt from filing Form 990?

Yes, certain organizations are exempt from filing Form 990. These include most faith-based organizations, state institutions, and subsidiaries of other nonprofits that may be covered under a group return.

5. When and how should Form 990 be filed?

Form 990 must be filed by the 15th day of the 5th month after the organization’s accounting period ends. For example, if your fiscal year ends on December 31, Form 990 should be filed by May 15 of the following year. The IRS encourages filing electronically for quicker processing.

6. What happens if Form 990 is not filed for three consecutive years?

If an organization fails to file Form 990 for three consecutive years, it will automatically lose its tax-exempt status. Once lost, an organization must apply again for tax-exempt status, which is not guaranteed to be granted.

7. Why is it important to review the instructions for each schedule and section of Form 990?

Each schedule and section of Form 990 requires specific information about the organization’s activities and finances. By reviewing the instructions, organizations can ensure they are providing accurate information and complying with IRS requirements.

8. Should I use accounting software or consult a tax professional for Form 990 preparation?

Using accounting software such as FastFund Accounting or consulting a tax professional can help ensure the accurate completion of Form 990. These resources can guide you through the process, help catch any errors, and provide advice tailored to your organization’s specific circumstances.

9. Is Form 990 available for public disclosure?

Yes, once filed, Form 990 is available for public inspection. This promotes transparency and allows the public, including potential donors and grantors, to understand more about the organization’s mission, programs, and finances.

10. Why is it important to accurately complete Form 990?

Accurate completion of Form 990 is crucial for maintaining tax-exempt status and fostering public trust. It provides a clear picture of the organization’s financial health, governance, and activities. Any inaccuracies could lead to penalties and potentially jeopardize the organization’s tax-exempt status.

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