Understanding Nonprofit Financial Statements and the Form 990 The Larned A Waterman Iowa Nonprofit Resource Center

Form 990

Filing a 990 form can be an overwhelming and confusing process, especially if it’s your first time. To help you through the process, here’s six steps to take before, during, and after transmitting your form to the IRS. Filing a 990-series return is an essential aspect of running a nonprofit.

The compensation may also need to be reported on Schedule J (Form 990), Part II (see the instructions for Form 990, Part VII, Section A, line 5). For each program service, section 501(c)(3) and 501(c)(4) organizations must report any revenue derived directly from the activity, such as fees for services or from the sale of goods that directly relate to the listed activity. This revenue includes program service revenue reported on Part VIII, line 2, column (A), and includes other amounts reported on Part VIII, lines 3–11, as related or exempt function revenue.

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For columns (B) through (D), add lines 2a through 2f, 3, 4, 5, 6d, 7d, 8c, 9c, 10c, and 11a through 11d. The amounts reported on line 12 in columns (B), (C), and (D), plus the amount reported on line 1h, should equal line 12, column (A). Combine the gain or loss figures reported on line 7c, columns (i) and (ii), and report that total on line 7d. Don’t include any unrealized gains or losses on securities carried at FMV in the books of account. On lines 7a and 7c, also report capital gains dividends, the organization’s share of capital gains and losses from a joint venture, and capital gains distributions from trusts.

  • A member of the organization’s governing body with power to vote on all matters that may come before the governing body (other than a conflict of interest that disqualifies the member from voting).
  • Failure to disclose that contributions aren’t deductible could result in a penalty of $1,000 for each day on which a failure occurs.
  • A Form 990 prepared for that state is acceptable for IRS reporting purposes if the state reporting requirement doesn’t conflict with the Instructions for Form 990.
  • To determine which persons are current or former officers, directors, trustees, key employees, or highest compensated employees, see the instructions for Part VII, Section A, column (C), later.
  • If the answer to either line 8a or 8b is “No,” explain on Schedule O (Form 990) the organization’s practices or policies, if any, regarding documentation of meetings and written actions of its governing body and committees with authority to act on its behalf.
  • The person who has ultimate responsibility for managing the organization’s finances, for example, the treasurer or chief financial officer.

It’s possible that some donors may base their gifting decisions on what they can discern from Form 990. The IRS requires an extensive amount of information from the organization; the instructions for how to complete the 12-page form are 100 pages in length. Additionally, the organization can be subject to a large penalty if it does not file on time. In general, a section 501(c)(21) trust will complete Form 990 in the same manner as any other organization required to file Form 990, including (without limitation) schedules or forms identified upon completion of Part IV, Checklist of Required Schedules; or Part V, Statements Regarding Other IRS Filings and Tax Compliance. Certain goods or services provided to employees of donor organizations or partners of donor partnerships may be disregarded for substantiation and disclosure purposes. Nevertheless, the donee organization’s disclosure statement must describe the goods or services.

Information reported on Form 990

A social club, for example, should report as program service revenue the fees it charges both members and nonmembers for the use of its tennis courts and golf course. Program service revenue includes income earned by the organization for providing a government agency with a service, facility, or product that benefited that government agency directly rather than benefiting the public as a whole. Check the “Former” box for former officers, directors, trustees, and key employees only if both conditions below apply. Management companies and similar entities that are independent contractors shouldn’t be reported as key employees.

Form 990

If the answer to line 3b is “No,” explain on Schedule O (Form 990) why the organization hasn’t undergone any required audits and describe any steps taken to undergo such audits. Do not include the present value of payments for approved claims, or the estimated liability for future claims. Don’t report on line 11 publicly traded stock for which the organization holds 5% or more of the outstanding shares of the same class or publicly traded stock in a corporation that comprises more than 5% of the organization’s total assets.

What Is a 990 Form?: A Nonprofit’s Guide

The organization, sometimes referred to as the “parent organization”, that holds a group exemption letter for one or more subordinate organizations under its general supervision and control. Answer “Yes” or “No” to indicate on line 2a or line 2b whether the organization’s financial statements for the tax year were compiled, reviewed, or audited Role of Financial Management in Law Firm Success by an independent accountant. An accountant is independent if he or she meets the standards of independence set forth by the American Institute of Certified Public Accountants (AICPA), the Public Company Accounting Oversight Board (PCAOB), or another similar body that oversees or sets standards for the accounting or auditing professions.

Organizations can report this information according to ASC 958 but aren’t required to do so. For example, an organization that follows ASC 958 and makes a grant during the tax year to be paid in future years should report the grant’s present value on this year’s Form 990 and report accruals of additional value increments in future years. The intent of the above instructions is only to facilitate reporting indirect expenses by both object classification and function. These instructions don’t authorize the allocation to other functions of expenses that should be reported as management and general expenses. Include lobbying expenses in this column if the lobbying is directly related to the organization’s exempt purposes.

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Also include unrelated business income from a business that exploits an exempt function, such as advertising in a journal. For this purpose, charitable contributions and grants (including the charitable contribution portion, if any, of membership dues) reported on Part VIII, line 1, aren’t considered revenue derived from program services. For organizations other than section 501(c)(3) and 501(c)(4) organizations, entering these amounts is optional. The organization isn’t required to provide information https://simple-accounting.org/how-to-start-your-own-bookkeeping-business-for/ about a family or business relationship between two officers, directors, trustees, or key employees if it is unable to secure the information after making a reasonable effort to obtain it. An example of a reasonable effort would be for the organization to distribute a questionnaire annually to each such person that includes the name and title of each person reporting information, blank lines for those persons’ signatures and signature dates, and the pertinent instructions and definitions for line 2.

If the 25% tax is imposed and the excess benefit transaction isn’t corrected within the tax period, an additional excise tax equal to 200% of the excess benefit is imposed. Most section 501(c)(3), 501(c)(4), or 501(c)(29) organization employees and independent contractors won’t be affected by these rules. Only the few influential persons within these organizations are covered by these rules when they receive benefits, such as compensation, fringe benefits, or contract payments. These rules only apply to certain applicable section 501(c)(3), 501(c)(4), and 501(c)(29) organizations.

Under section 501(c), 527, or 4947(a)( of the Internal Revenue Code (except private foundations)

Answer “Yes” if the organization reported on Part IX, line 3, column (A), more than $5,000 of aggregate grants and other assistance to foreign individuals, or to domestic organizations or domestic individuals for the purpose of providing grants or other assistance to a designated foreign individual or individuals. Generally, anyone who is paid to prepare the return must sign the return, list the preparer taxpayer identification number (PTIN), and fill in the other blanks in the Paid Preparer Use Only area. For a corporation, enter the state of incorporation (country of incorporation for a foreign corporation formed outside the United States). For a trust or other entity, enter the state whose law governs the organization’s internal affairs (or the foreign country whose law governs for a foreign organization other than a corporation). Enter the organization’s current address for its primary website, as of the date of filing this return.

Form 990

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