Form 990: What a Nonprofit Reports and When It Is Due

Form 990: What a Nonprofit Reports and When It Is Due

Form 990 is the annual information return that most tax-exempt organizations file with the IRS, and it is the one document where a nonprofit's finances, governance and pay are written down for anyone to read. The IRS does not use it to collect tax. Donors, grantmakers, reporters and watchdogs use it to decide whether to trust you.

That is why the form deserves attention before it is due, not during the week it is due. Most of what goes on it comes from the books, and books that were not kept with the form in mind are hard to fit into it afterward.

System Six, a Seattle bookkeeping and fractional CFO firm whose live profile lists Non-Profit Organizations as a specialty, is the firm written up here as one place to ask about the books behind the return. This is an explainer, not a ranking. System Six is a vetted Sam's List member and a paying member of our featured program; payment does not buy the language we use or its reviews.

Which Version of Form 990 Does Your Nonprofit File?

There are three versions, and which applies depends mostly on size. In general terms:

Version	Generally for	What it is
Form 990-N	The smallest organizations, with annual gross receipts normally at or below a set low threshold	A short electronic notice, not a full return
Form 990-EZ	Mid-sized organizations, with gross receipts under $200,000 and total assets under $500,000	A shorter return
Form 990	Larger organizations, with gross receipts of $200,000 or more or total assets of $500,000 or more	The full return, with schedules

Private foundations file a different form, Form 990-PF. Some organizations, such as churches, are not required to file at all. Thresholds are in the IRS instructions each year, so check the current ones before you decide which form to use.

The limitation: the version you filed last year is not a guarantee for this year. An organization that grows past a threshold, even by a grant that arrives late in the year, can move into the next version.

What Form 990 Reports

The full form is organized in parts, and it is worth knowing what each asks for so the books can supply it.

Mission and programs. A description of what the organization does and what it accomplished in the year.

Governance. How many board members there are and how many are independent, whether there are written policies on conflicts of interest and whistleblowers, and how the form was reviewed by the board.

Revenue and expenses. Contributions, grants, program revenue and investment income, and expenses by category.

Functional expenses. Expenses allocated between program services, management and general costs, and fundraising. This is the part that depends most on how the books were set up during the year, because every expense has to be assigned somewhere.

Compensation. Pay for officers, directors, key employees and the highest-paid staff, which is public.

Balance sheet. Assets, liabilities and net assets.

Schedules add detail on topics such as public charity status, large donors, grants made and related organizations.

The limitation: the form is built from the books, so it is only as reliable as the books. If expenses were never tagged as program, management or fundraising during the year, someone has to reconstruct that split in a hurry at filing time.

When Is Form 990 Due, and What an Extension Does

The return is generally due on the 15th day of the fifth month after the organization's tax year ends. For a calendar-year organization, that is May 15. For a June 30 year end, it is November 15. If the date falls on a weekend or holiday, it moves to the next business day.

An organization can generally get an automatic six-month extension by filing Form 8868 by the original due date. The extension is for filing, and the form should be filed before the original deadline passes. Filing Form 8868 is a short task, and it is far cheaper than a late return.

The limitation: an extension does not apply to everything an organization has to do. Some state charity registrations have their own due dates and may tie to the federal form, so check yours.

The Penalty That Matters: Automatic Revocation

A late Form 990 can bring a daily penalty that continues until the return is filed, up to a cap, with larger organizations facing higher daily amounts. The penalty can sometimes be abated for reasonable cause.

The consequence people miss is more serious. An organization that does not file a required return, or the electronic notice, for three consecutive years loses its tax-exempt status automatically. The organization has to apply for reinstatement, which in some cases can be made retroactive, but that is not guaranteed and takes time.

If a nonprofit has one person who handles everything and that person leaves, this is the failure that follows. A calendar with the filing date and a named backup is the cheapest control there is.

The limitation: penalty amounts and reinstatement routes depend on size and facts. If you suspect missed years, talk to a CPA or attorney before you file anything.

Who Sees Form 990, and What Stays Private

Form 990 is a public document. Organizations must make recent returns available for inspection, and many are posted online by the IRS and by third-party watchdog sites. Anyone can read the compensation of your top staff and your expense allocation.

Names of donors on Schedule B are generally not disclosed for public copies of most organizations, but the rest is open. Boards usually review the return before it is filed, and Part VI of the form asks whether they did.

The limitation: public does not mean anyone can read it correctly. A high fundraising percentage in a year with a big event, for example, can look worse than it is. A short note in the narrative sections is where you explain it.

Where the Books Have to Tie Out First

A clean Form 990 starts months earlier. The functional expense split needs a coding scheme in the chart of accounts. Restricted gifts need to be tracked so net assets with and without donor restrictions are right. Payroll records need to agree with the compensation reported. Grants received and made need support.

System Six is based in Seattle, founded in 2009, with about 41 employees, serving clients nationwide. Its live profile lists Non-Profit Organizations, Professional Service Firms and Real Estate Investors as specialties, and bookkeeping, accounts payable and receivable, payroll, advisory services and financial advice and coaching among its services, with monthly fixed fees starting at $800.

System Six is early in building a review history on Sam's List, so we do not cite a review count and describe the firm by what its profile says instead.

The limitation, plainly: System Six's profile lists a $1 million revenue minimum, so a smaller nonprofit may fall outside what it takes on. The profile does not say whether it prepares Form 990 returns, so ask whether it prepares the return or works with your CPA to deliver the books that support it.

Frequently Asked Questions

What is Form 990?

Form 990 is the annual information return most tax-exempt organizations file with the IRS. It reports finances, programs, governance and compensation. It is public, and donors and grantmakers read it. Smaller organizations may file the shorter Form 990-EZ or the electronic Form 990-N instead.

When is Form 990 due?

Generally by the 15th day of the fifth month after the organization's tax year ends, which is May 15 for a calendar-year organization. A six-month extension is generally available by filing Form 8868 on or before the original due date.

What happens if a nonprofit does not file Form 990?

Late returns can bring daily penalties, and an organization that does not file for three consecutive years loses its tax-exempt status automatically. Reinstatement requires an application to the IRS. Talk to a CPA or attorney before filing late returns.

Does Form 990 show donor names?

The return includes a schedule of large donors, but for most organizations the donor names are not disclosed in the public copy. Compensation of officers and top staff is public. Ask your CPA what will be visible on your return.

If your fiscal year ended recently, start by asking whoever keeps your books whether expenses are tagged as program, management or fundraising. You can browse bookkeepers on Sam's List, including the firm above, and ask how each one supports the return.

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About the author: Kimberly Green is the cofounder of Sam's List, where business owners and high earners find vetted CPAs, financial advisors, and fractional CFOs. She's met one-on-one with 400+ financial professionals and writes from the real data behind thousands of client-advisor matches. Ask her anything about finding an accountant - she's heard it all, including the questions people are afraid to ask.