Get Ahead of the Tax Curve with These Tips to File Your Form 990
The majority of nonprofits must fill out a form 990 annually to maintain a tax-exempt status and remain compliant with state and federal regulations. While there are some select organizations that are not required to fill out these forms, the vast majority must do so as it’s their legal obligation.
However, there’s little reason to stress. Here at File 990, we’re focused on helping nonprofits thrive during tax season. We want to ensure you have an easy-as-pie experience filing to maintain your tax-exempt status.
That’s why we’ve compiled an overview of form 990s as well as some top tips for nonprofits. These tips include:
- Setting filing reminders.
- Keeping accurate records.
- Not including personal information.
- Using tax e-filing software.
Let’s jump in to make sure your nonprofit rocks this tax season!
Form 990 Overview
Taxes are the main source of income for the government, so they don’t just hand out the exempt status. They want to be sure that organizations that don’t pay taxes have good reason not to. That’s what your form 990 is for. It helps reassure the government that your organization deserves this status.
Before jumping into some best practices, your nonprofit needs to know which form 990 to file. There are a few different options to choose from: form 990-N, 990EZ, 990 and 990PF.
The form 990-N is also known as the 990 postcard. This form is submitted by nonprofits that have gross receipts of less than $50,000 per tax period.
The 990 postcard is an eight-question electronic form designed for small nonprofits that may not have a financial or accounting expert on staff.
Your Form 990EZ can be submitted by nonprofits who have gross receipts less than $20,000 or total assets worth less than $500,000. This four-page form is just a single step up from the 990-N.
Form 990 is a 12-form that is required from nonprofits who have at least $200,000 in gross receipts or $500,000 in assets.
The form 990PF is a form designed specifically for private foundations. Private foundations must fill out this form annually no matter their financial status.
Now that you know which form your nonprofit needs to file, let’s dive into these top tips!
1. Set Filing Reminders
One of the biggest issues nonprofits run into when it comes to filing their taxes is filing them on time. This is a dangerous problem to have due to the financial penalty that accompanies late filing.
This is why we suggest setting a reminder to file annually. One option to do so is to add the 990 filing process to your annual calendar. However, the easiest way to set reminders to file on time is to invest in an e-filer that will send you an email when it’s time to file based on your nonprofit’s fiscal year.
We understand you may have some questions about late filing. For instance, you may ask yourself:
When do I need to file my 990 by?
Your nonprofit’s tax deadline may fall into two different categories depending on the fiscal year.
- If your nonprofit follows the calendar fiscal year, you need to file your 990 by May 15.
- If your nonprofit doesn’t follow the calendar fiscal year, you’ll need to file your 990 by the 15th day of the 5th month following the conclusion of your fiscal year.
What happens if I forget to file my 990?
If your nonprofit’s gross receipts are less than $100,000, you’ll need to pay a penalty of $20 every day that your 990 is late. The maximum penalty in this case is $10,000 or 5% of your gross receipts.
However, if your nonprofit’s gross receipts exceed $100,000, your penalty jumps to $100 per day with a maximum of $50,000.
If you forget to file your form 990 three consecutive years, your nonprofit will lose its exempt status.
Is there a way to avoid these horrible penalties?
Yes! If you’re afraid your nonprofit will be late filing your taxes, don’t fret too much. You can file a form 8688. This form will extend your filing deadline another six months.
While the from 8688 is great, the easiest option is to simply make sure you file your nonprofit’s form 990 on time each and every year by setting annual reminders.
2. Keep Accurate Records
Nonprofits that keep accurate records throughout the year often find it easier to file their form 990s when the time comes. This means keeping accurate financial data throughout the fiscal year as well as accurate records of your past forms.
Two of the best strategies to maintain your nonprofit’s accounting records include: using a specialized 990 e-filer and ensuring your nonprofit’s accounting software is up-to-par.
Use a form 990 e-filer
Form 990 software often collects and stores information from past filing to ensure accurate and effective filing in the future.
For instance, File 990 makes it easy for nonprofits to import their information directly from the IRS database by entering their EIN.
Directly pulling information from the IRS database ensures accuracy and consistency. After pulling this information, your nonprofit simply reviews the information and submits the form.
Ensure your nonprofit’s accounting software is up-to-par
When you must decide which form 990 to fill out, and while you’re filling out the information, your nonprofit will need access to your accounting information from the last year.
Be sure you have access to financial information about your last fiscal year. The right accounting software can help keep this information organized and up-to-date.
This means when it’s time for tax season, your nonprofit can easily pull records directly from your accounting software solution to quickly and easily find the information you need. If you’re in the market for new software, Community Brands has a handy nonprofit accounting software guide to help organizations find the best solution to meet their needs.
3. Don’t Include Personal Information
One important difference between your personal taxes and your nonprofit’s tax forms is the fact that your tax forms are considered private documents. However, your nonprofit’s form 990 is public record.
This means it’s of the utmost importance for you to not include any personal information on the form 990 when you file.
There are places where it’s important for your nonprofit to include personal information for donors, such as on their donor acknowledgement letters. These letters include tax information to the individual donors such as the date and gift amount. However, nonprofit tax forms are not one of the appropriate places for this information.
There are even specific places where your nonprofit can highlight details about individual donors and their contributions, such as your annual report or a newsletter. But not in your form 990!
Be extra careful when you file your 990 that you don’t include any personal information from anyone in your organization or from any of your donors.
A common mistake that nonprofit professionals make while filling out their 990 form is including a social security number. Be careful to avoid making silly mistakes like these for your nonprofit!
4. Use Tax E-Filing Software
The solution that makes it easiest to implement all of these tips is an IRS-authorized form 990 e-filer. While people used to fill out tax papers by hand and individually mail each one, times are changing in the nonprofit world!
An effective e-filer will help your organization file the form 990 on time.
By automatically saving your nonprofit’s fiscal year information, an effective software solution can send automatic reminders to your financial staff members. This way, you’ll never forget to file!
An e-filer will help you keep records accurate.
When your electronic filer pulls information directly from the IRS database, it’s easy to ensure that the data included on your form 990 is consistently accurate year after year.
If you’re more comfortable working on paper than online, make sure you find nonprofit tax software that allows your nonprofit to download and email the completed form so that it’s ready for printing.
Tax software prevents the inclusion of personal information.
Consider the steps you take with an e-filer: first, you upload your EIN, then you answer a series of questions and allow the software to fill in the form according to your answers.
The tax software will not ask for any personal information, so your nonprofit financial professionals will have no reason to include personal information. This makes it much less likely that those filling out 990 forms will accidentally include irrelevant or inappropriate information.
If you’re interested in researching more about nonprofit tax software, click here for re:charity’s top list of providers.
Make sure your nonprofit is prepared. The last thing you want is to lose your tax-exempt status for silly reasons. Incorporate these key tips and get ahead of the tax curve this year.
David is a marketing executive, public speaker and author who specializes in the effectiveness of storytelling in building revenue. As the VP of marketing for Togetherwork, David leads an in-house marketing agency that provides a depth of services to the numerous partner companies within the enterprise. Prior to his current role, David was the VP of marketing for OmegaFi where he established lead generation and nurturing systems and, most notably, oversaw unprecedented marketing growth for the software company.
Early in his career, David built a new content marketing team from inception as the content strategist for Regenerative Medicine Solutions, a cutting-edge medical firm.
David holds a bachelor’s degree from the University of South Florida, and an MFA from the University of Tampa–both in creative writing. He has published various pieces of fiction and authored "Kingmakers: A Content Marketing Story," a reflection on the use of creative writing skills in modern marketing practices.
David is a member of the Chi Phi Fraternity and enjoys volunteering at educational programs around the county for the organization.