Why Form 990 is One of the Most Important Documents for Nonprofits

Why Form 990 is One of the Most Important Documents Your Nonprofit Produces

To most nonprofit officers, directors, and managers, Form 990 is an annoyance. It's just another government hoop to jump through on the way to accomplishing your all-important mission.

For those of you who rely on certain types of grants, you probably see Form 990 as your ticket to getting the grant, since some grant-making organizations demand a copy of the most recent Form 990.

I've looked at enough Form 990's and helped with enough penalty abatement cases to know that most organizations, and even most CPAs don't take Form 990 seriously.

That's a big mistake and a lost opportunity.

It's a big mistake because even a small mistake on Form 990 can result in big penalties. Did you know that filing an "incorrect or incomplete return" is the same as not filing a return at all? Forget to check a box properly or forget to file a required schedule can trigger massive penalties.

Think $20 a day is a small penalty? What if the IRS doesn't bother to notify you that your return was incomplete until 2 years after you file it? Let's see, 700 days X $20. That's $14,000. Happens every day to small organizations that never thought it would happen to them.

But as bad as that is, the IRS isn't really the authority that monitors charitable organizations. That's the public's job. And the media. And Form 990 is one of the tools they use.

Did you know that newspapers and bloggers can easily find your organization's 990 online?

Do you frequently give short cryptic answers to questions on the form? Do you leave important questions blank?
Do you take the opportunity to attach meaningful detailed explanations?
Do you use the Form 990 as a way to "sell" your organization and its accomplishments to potential donors?
If not, you should.

What should an organization do to show it takes Form 990 seriously?

* Generally, be as transparent as possible on Form 990. What you put on the form should match what your organization actually does.
* Keep good bookkeeping records that properly classify income and expense items.
* Reconcile check register to bank statements each month. Please.
* Keep track of your donors and be able to quickly produce a report that shows how much each donor has contributed each year since the beginning of the organization.
* Hire someone with the expertise and experience to prepare the 990.
* Know the due dates. Don't depend on your tax return preparer to remember when its due. Even CPAs sometimes miss deadlines unintentionally. Ask your preparer for written date-stamped proof of filing for both returns and extensions.
* If you prepare the return yourself, you should have an experienced professional look it over before filing it with the IRS. Expect to pay for that service. If you mail the return or extension request to the IRS, always use Certified Mail with Return Receipt.
* Be wary--be very wary of professionals who agree to prepare your organization's Form 990 for free. It is a very time-consuming project and requires specific expertise. Many CPAs simply don't have that expertise or experience, though they mean well.

If you don't really take your organization's Form 990 seriously, I encourage you to reconsider.

Consider that time and money spent to properly prepare a complete Form 990 is an investment in transparency and accountability which leads to public trust. And it can help keep donations and grants flowing in.

What would donors think if you end up using their donation to pay penalties to the IRS?

What if your local media or an investigative blogger takes a close look at your Form 990?

What will it say about your organization? Does it match reality? Does it create more questions than it answers, or does it engender a feeling of trust?

The choice is yours.

[ReiRidingSolo]

thank you for all of the helpful videos. Would a 501c7 get a late fee or penalty if their tax liability was $0?

[DrAlexCullison]

I obtained our 501c3 nonprofit status this last July.
We incorporated in Virginia.

Do I need to file a 990 for 2019? How much do you charge for filing a 990? Would we be eligible for 990ez? We have only raised $200 so far, so far. I personally loaned our nonprofit $4200 for the startup. Should I show that? Do you also prepare annual reports for the Commonwealth of Virginia? If so, what do you charge for that?

[Olivia-wdqd]

HI our church have received the letter from IRS which said no require to fill form 990 from 990-ez 990-n .Is that means we don't need to fill any from no matter how much income we have ?

[mwdmwd]

How can I find a healthcare non-profit’s form 990 -PF?

[waynecmontgomery]

Your sales video and pitch was crap "STOP SCARING PEOPLE, EARN YOUR MONEY THE RIGHT WAY".