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Form 990: Overview and Common Mistakes

Updated: Mar 8

I decided to learn about Form 990 as a fun Friday activity. I learned this because I have an interest in non-profits, and this is the form that tax-exempt non-profits fill out to maintain their status and let the public know about their work.


Form 990 is the United States Internal Revenue Service tax return form used by organizations that are claiming tax exempt status. It details the organizations mission, programs, and finances. 501(c)(3) organizations must file this form.


For the first part of the form, fill in everything you can, and leave blank anything that does not apply.


Overview


Part 1. Here you detail the activities and basic governance of your organization. Details are very important to qualify for a tax exempt status.



Part 2. Have authorized personnel sign


Part 3. Indicate the accomplishments of the organization, and describe in detail on line four.


Part 4. Fill out schedules. Tax exempt organizations may have to fill out numerous schedules along with the rest of the 990 tax return to show the organization has all applicable schedules for the tax exempt status.


Part 5. Disclose information from other IRS filings to ensure compliance with IRS regulations. Fill out all applicable lines.


Part 6. Detail governance and management structure taken directly from your organizations charter or incorporation papers.


Part 7. Detail all compensation distributed to key employees, officers, directors, or trustees of the tax exempt corporation.


(Key employees are employees who have received >$150 in compensation and had control of 10% or more of the organizations assets, income, expenses, activities, budget, expenditures, or employee compensation

Officers are people who have administrative or managerial authority in a corporation

Directors or trustees are people who are members of the organizations governing body during the tax year who have a vote)


To get this information, you should hand out a questionnaire to these people ahead of time asking:

  • Compensation received from related organizations

  • Relationship to, and business transactions with related organizations

  • Transactions between family members and related organization

  • Transactions between related organizations and businesses their family owns or controls

  • Family or business relationship between other key employees, officers, directors, or trustees

  • Grants or other assistance they or their family received from the organization

Part 8. Provide statement of revenue


Part 9. Provide functional expenses


Part 10. Provide final balance sheet.



Which version of the form does my organization need to fill out?


Form 990 is the "long form" for organizations that have $200,000 or more in gross receipts, or total assets of $500,000 or more.


Form 990-PF is filed by all 501(c)(3) private foundations and 4947(a)(1) non-exempt charitable trusts. Only those types of exempt organizations use Form 990-PF.


Form 990-EZ

Organizations that have less than $200,000 in gross receipts or less than $500,000 in total assets. If both apply, you can file this form, if not, file 990.


990-N

Organizations that make $50,000 or less in gross receipts.


Smaller organizations may be able to mail it in, but larger organizations filing over 250 returns and that have $10 million or more in assets are required to file these forms electronically.


What are the different schedules?


Schedule A

Organizations that use this Schedule: 501(c)(3) or 4947(a)(1)

What this Schedule covers: Public Charity Status and Public Support


Schedule B

Organizations that use this Schedule: All

What this Schedule covers: List of Contributors to Organizations


Schedule C

Organizations that use this Schedule: 501(c) and 527

What this Schedule covers: Information on political campaign and lobbying activities


Schedule D

Organizations that use this Schedule: All

What this Schedule covers: Supplemental Financial Information


Schedule E

Organizations that use this Schedule: Schools

What this Schedule covers: Schools Policies and Programs


Schedule J

Organizations that use this Schedule: Any

What this Schedule covers: Compensation Information


Schedule L

Organizations that use this Schedule: Any

What this Schedule covers: Transactions With Interested Persons


Schedule R

Organizations that use this Schedule: Any

What this Schedule covers: Organizations and Unrelated Partnerships


Schedule O

Organizations that use this Schedule: Any

What this Schedule covers: Open form for supplemental information


Most common errors while filing the 990:


Missing or incomplete schedules


To ensure it doesn't happen in the first place:

  • Make sure you are filing for the correct tax period

  • Carefully go over the Checklist of Required Schedules again. Answer yes or no to every question, and make an entry on every total line, including 0 when appropriate

  • File electronically. The error rate for form 990 and 990-EZ drops from the 20-30% range to 1%


AAAH it already happened, what do you do?

Don't panic, if the information is incomplete the IRS will send it back. Once you get it back, follow the instructions to provide missing or incomplete information. Sign your return, be sure to give a reasonable cause as to avoid penalties, explaining why it was done incorrectly. Within ten days send it back to the mailing address, or submit it electronically, and everything will be considered filed.


Conclusion

Form 990 is long and has a lot of variants. The best advice is to be very familiar with your business and what it does, then carefully follow the instructions. Keep online records, and fill out the forms online. There are quite a few resources out there that can be helpful in the process to help you along the way.


Sources I found helpful:

Form 990 Instructions 2019

Form 990 Instructions for Schedule A

FAQs

Missing Information

Form 990 Overview Course

https://www.irs.gov/






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