Just because you’re a nonprofit doesn’t mean you never have to deal with the IRS.
Believe us, you do.
While tax-exempt with not-for-profit status, nonprofits still need to file annual returns to the IRS in what’s called a Form 990.
Filing this annual returns document in a thorough, careful, and timely manner ensures that your organization keeps its tax-exempt status, and that it remains eligible to receive tax-deductible contributions from donors.
Let’s go over some basics about the Form 990 and how you can correctly approach your nonprofit returns. We’ll help your organization get ready to file confidently during the 2023 tax season!
A brief guide to filing your nonprofit’s annual returns this tax season
Meet the Form 990
The Form 990 is the foundation of every nonprofit’s annual filing during tax season. Let’s get you acquainted with this essential document if you aren’t already.
There are four versions of this filing form: the Form 990, the Form 990-EZ, the Form 990-N, and the Form 990 PF. The form you will need to use depends on your organization’s yearly financial activity. Most tax exempt nonprofit organizations are required by the IRS to file electronically.
Also note that if a nonprofit fails to file for 3 consecutive years, its tax-exempt status will be revoked.
For most 501(c)(3) organizations, one of the following is used:
- If your nonprofit makes more than $200K in gross receipts, and/or has more than $500K in total assets, use a Form 990.
- If your nonprofit makes less than $200K in gross receipts, and/or has less than $500K in total assets, use a Form 990-EZ.
- If your nonprofit is a small organization that makes less than $50K in gross receipts, use a Form 990-N.
- If your nonprofit is a private organization, then you would require a Form 990 PF, regardless of income and asset size.
Remember: gross receipts are the total amount of income received from all income sources, before any costs or expenses are deducted. That’s why keeping supporting documents of all income your organization receives is vital.
It’s also worth noting that as you approach filing your nonprofit annual returns, you are telling a deeper story about your organization that your donors can see.
Donors can choose to review your nonprofit’s Form 990 to inform their decision-making about whether or not to contribute financial support. So as you fill out your Form 990, consider the story you’re telling. Make the sum of parts show a compelling and accurate narrative of your nonprofit’s work and mission. The numbers can be your friend here!
Nonprofit filing checklist for 2023
As you tell your nonprofit’s story through this crucial IRS requirement, here’s a checklist for you to follow to ensure that you’re properly preparing your nonprofit filing of annual returns:
- Check with the IRS to determine whether your organization needs to file.
- Look at the money your nonprofit made during the last applicable tax year, and determine which tax form you need to file.
- Have your board of directors thoroughly review the requirements in your Form 990 prior to filing.
- Consider hiring a tax preparer or accountant to help prepare your Form 990. Having a professional on hand who is experienced in handling tax-exempt finances could greatly expedite the process and relieve ambiguity and stress on your part. See how Temple Management’s certified public accountants stack up in keeping nonprofits and ministries prepared for their yearly filing.
- Collect basic information:
- Organization’s IRS tax exempt status
- Employer Identification Number (EIN)
- All amounts and dates for federal, state, and local estimated tax payments made
- The organization’s mission and primary exempt purpose
- A list of program service accomplishments from the nonprofit within the tax year
- Collect officer information:
- A list of current or former officers, directors, trustees, key employees, highest paid employees, and independent contractors; plus each person’s name, title, and address.
- Detailed report of employee/officer compensation and benefits, plus their average hours per week doing work related to the organization
- Collect organization and financial records:
- A balance sheet
- All financial statements
- All unrelated business income
- Revenue and functional expenses
- Reconciliation of net assets
- Reports of fundraising activities, events, etc. throughout the year
- Any supported and/or supporting organizations
- A list of contributions made, which includes the names and addresses of contributors, plus the amount of their contributions
- A list of applicable grants, tax-exempt bonds, or other assistance
- Copies of any Form(s) 1099 and W-2 the organization has issued
- Any state and local payroll tax paid
- Any federal unemployment, Social Security, and Medicare tax paid
- Collect records of assets acquired and/or disposed of during the tax year:
- Depreciation schedules
- Dates of purchase, cost, trade-in allowance, and business use percentage (acquired assets)
- Date of purchase, cost, sales proceeds, trade-in allowance, expenses of the sale, and accumulated depreciation (disposed assets)
- Mileage log, maintenance costs, and gas costs of business use/total use for vehicle (owned or leased)
- As you fill out the Form 990, describe your nonprofit’s mission in straightforward, plain language.
- Are you demonstrating how the nonprofit follows sound governance, management, and disclosure practices in your answers to the prompts in Part VI of the form?
- Ensure that the nonprofit’s story will emerge from the filing process accurately, clearly, and soundly. Remember that your Form 990 is ultimately more than just an annual return filing –it’s, in essence, a marketing document to donors that encapsulates your nonprofit’s purpose, programs, and finances.
- If you find you need an extension for submitting your return, you’ll need to fill out a Form 8868, and submit this extension no later than your return’s original due date.
- Sign your return, and submit it on time! If you’re not e-filing your return, you can mail it to the following physical address: Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0027.
How Temple can keep you on top of your annual returns
Temple Management consists of industry professionals whose virtual bookkeeping and nonprofit accounting services help nonprofits prepare annual filing, audits, establishing financial best practices, and more.
Temple‘s team of Certified Public Accountants (CPA)s and Accountants can help you define your financial needs and do the legwork of managing your fund accounting.
Learn more about how Temple can help you focus on what you love, while we focus on what we’re good at: empowering nonprofits to succeed financially.
Reach out to our team virtually here, or give us a call at 770-892-2087.