IRS 990 FAQs
State requirements vary from state to state. You should talk with your auditor or another financial advisor about the requirements for your state, or contact the appropriate state government departments. The National Council of Nonprofit Associations (202-467-6262, www.ncna.org) can also refer you to the state association of nonprofits for your state.
In general, nonprofits (excluding churches) which normally receive $25,000 or more in annual income must file 990s and Schedule A. There are other schedules which are required by some nonprofits; for example, 990-T is required for nonprofits which have “unrelated business income” during the year.
In addition, nonprofits that have expended $300,000 or more in federal funds must have an A-133 audit (see FAQ #19).
The Unrelated Business Income Tax (UBIT) was enacted to prevent unfair competition from nonprofit organizations using their tax free monies to expand their businesses. Briefly, unrelated business income results from an activity that is 1) a trade or business, 2) regularly carried on, and 3) is not substantially related to the organization’s tax-exempt purpose. Certain activities such as work performed by volunteers, activities for the convenience of members, etc., are among the many activities specifically excluded from this broad definition.
An organization with unrelated business income is subject to tax based on corporate income tax rates. Generally, if an organization receives more than 5% of its total income from unrelated business income, it may endanger its tax-exempt status.
Form 990 is filed with the Internal Revenue Service. In addition, as of June, 1999, there are new laws in effect on public disclosure of the 990. A summary follows, and you can also read the regulations directly at www.gpo.gov. In the “Search Terms” section, type “Form 990” and “Public Disclosure” with quotation marks around each phrase.
IF you think you’re going to be late getting your forms in, apply for an Extension of Time to File. The application for extension must be submitted on or before the due date of the required forms, and must be submitted in duplicate. In most cases requests for extensions are granted for 90 days (requests for longer than 90 days must be supported with evidence of need; no extensions are granted for more than six months). This form is called “Application for Extension of Time to File,” IRS Form 8868. You can pick up the Application for Extension when you get your copy of the 990 or 990EZ.
Yes, but you CAN omit the section of Schedule A which lists the names and addresses of contributors. You can also omit Form 990-T (which not all nonprofits are required to file).
One way to manage this process is to make a special version of “Form 990 public disclosure copy” which omits the above information. Keep copies at your front desk that can be provided to those who request them in person. If you are charging for copies of your 990, it’s convenient to make up an “order form” which shows the amount you are charging, so that this order form can be mailed to requestors or given to requestors in person.
You can charge a maximum of $1 for the first page and 15 cents for each additional page. Permission to charge for copies was intended in part to compensate the organization for costs in reproducing the documents, and in part to prevent harassment by a group of people who, for example, asks for thousands of copies of your 990.
Yes, although you are not required to do so. If you do make your documents available on the web, you are not required to respond to requests for your 990 as above. Keep in mind that whether or not YOU post your 990 on the Internet, anyone else could choose to publish it on their own site.
A more detailed type of audit is required for organizations which spend $300,000 or more (in a given year) in total federal funds (including federal funds which have passed through state or local government agencies). This audit, performed by a C.P.A., is described in OMB Circular A-133 and is usually referred to as an A-133 audit. A-133 audits are frequently substantially more expensive than “regular” audits.
The complete text of OMB Circular A-133 can be found on-line at: www.whitehouse.gov. You can also order it by phone from the Office of Management & Budget Superintendent of Documents, at 202-512-1800.
You can post your 990 on your own website, or as part of a database of similar documents (such as the one at http://www.guidestar.org). The documents must be available for downloading at no cost. Software such as Adobe Acrobat must be used that reproduces a “graphic image” of the 990 in exactly the way it was filed with the IRS, and in such a way that someone cannot download your 990 and easily make changes to it. If you choose to post your 990s on the Internet instead of making them available on request, you must tell anyone who requests your 990 the website at which your 990 is located.
The California Attorney General’s Office plans to post 990s for California nonprofits on its website in the fall of 1999. This will meet the IRS requirement for disclosure.
- There are several uses for the word “audit” in the context of nonprofit financial accountability. These include:
- An audit by an independent C.P.A. (certified public accountant). The federal government does not require that you have an audit, unless you receive federal funds over a certain amount. Some state governments require nonprofits to have annual audits if their revenues are above a certain threshold.
- An audit by the government agency itself. In some cases government agencies send their own staff to audit or review your performance on a particular government contract. In some cases, such government audits focus on the degree to which you are meeting the contract’s deliverables, while others may focus on your accounting systems or on the procedures you use to maintain client confidentiality.
- An “A-133 audit”.
Yes. You can apply to the IRS to investigate whether a harassment campaign is going on. During the investigative period you do not have to provide copies of your 990 to the public. Organizations can ignore multiple requests from a single individual or address without seeking a determination of harassment from the IRS and may disregard requests beyond the first two within any 30-day period or the first four within any one-year period that come from the same person or same address.
The fine for filing a late or incomplete form is $20/day up to the lesser of $10,000 or 5% of gross receipts. For organizations with gross receipts of more than $1 million in the year, the penalty is increased to $100/day to a maximum of $50,000. If, however, you’ve filed an Application for Extension of Time to File (see FAQ #6), you won’t be penalized if you file within the 90-day extension period (if your application is approved), or between the time you file the Application and the date it is rejected (if it is rejected). In other words: be safe and if there’s even a possibility you’ll be late, file the Application for Extension of Time to File. It takes only a few minutes to complete, and you’ll have the time to be sure your 990 is accurate.
On request, you must provide copies of the following:
- Your three most recent Form 990s. However, you are NOT required to provide one section of Schedule A–the one which contains the names and amounts of all donors–this section may be deleted when copies of the 990 and Schedule A are provided to the public.
- Form 1023, which is the original application for nonprofit corporate status (filed at the time your organization was formed), UNLESS your 1023 was filed prior to July 15, 1987 and you have not been in possession of a copy since that time
- All schedules, attachments, and other supporting documents that were filed with any of the above forms, EXCEPT the names and addresses of contributors AND Form 990-T (if you filed it, which is the Exempt Organization Business Tax Return).
Requests made in person: If an individual comes to an office that has three or more employees located at the same site, and a request is made in person, the organization must provide a copy on the same business day.
Requests made in writing: Requests received by mail must be provided within 30 days of receiving the request. If you charge for copies of your 990 (see FAQ #14), you can choose to require advance payment. In that case, the copy must be made available within 30 days of receiving the payment.
Schedule A is a component of Form 990, and requests your sources of financial support, the salaries of your highest-paid employees, and other information. Form 990 is a public document, and members of the public can obtain copies from the IRS, or by sending a written request to a nonprofit organization. One section of Schedule A–the one which contains the names and amounts of all donors–can be deleted when copies of the 990 and Schedule A are provided to the public.
All nonprofit organizations with total annual receipts “normally” over $25,000 must file this federal form annually (churches and government agencies do not file). If gross annual receipts are between $25,000 and $100,000, AND if your assets are less than $250,000, Form 990EZ may be filed instead.
Form 990 is due 4 1/2 months after the close of your fiscal year. For example, if your fiscal year ends on June 30, Form 990 is due on November 15. If your fiscal year ends on December 31, Form 990 is due on May 15. Schedule A is due on the same date as Form 990 is due. (A Form 990 that has been postmarked on the due date will be accepted as having been filed on time.)
Most federal offices have 990 and 990 EZ forms, as well as the Instructions for Form 990. If you don’t have a federal office building nearby, you can request them by phone at 1-800-829-3676 (1-800-TAX-FORM). In addition, many federal forms are available on-line: http://www.irs.gov
This set of FAQs on Federal Form 990 was written by Jan Masaoka of CompassPoint Nonprofit Services. The Editorial Review Committee for this set of FAQs included Russy Sumariwalla of 990 in 2000, and the following members of the California Management Assistance Partnership (C-MAP):
Richard Fowler, CompassPoint Nonprofit Services (San Francisco)
Liz Norton Schaffer, CompassPoint Nonprofit Services (San Francisco)
Hazel Smith, Nonprofit Resource Center (Sacramento)
Jan Stohr, Nonprofit Resource Center (Sacramento)
Recently, the Board Café newsletter had an article titled, “Six Things the Board President Should Check Before Filing Form 990,” which we reprint below:
SIX THINGS TO CHECK BEFORE FILING FORM 990
by Jan Masaoka
Federal Form 990 is the main document nonprofits are required to disclose to the public, and any member of the public can request a copy, so you want to make sure that what it says is not only accurate, but reflects what you want to communicate to the public. Form 990, required by the IRS for all nonprofit organizations except those with annual revenues of less than $25,000 and religious organizations, is frequently requested by donors and grantmakers, and increasingly available on the web. But sometimes boards and executive directors don’t pay much attention to what’s on their 990s, and you could have an unpleasant surprise if you haven’t made sure you feel comfortable with the “story” the 990 tells about your organization.
Your organization’s 990 is due on May 15 if your fiscal year ended on December 31 (990s are due on November 15 for organizations with fiscal years ending June 30–in other words, 4 and 1/2 months after the close of the fiscal year). 990s are often prepared by the organization’s CPA auditor, but can be prepared by the staff or board as well. Take 15 minutes to review the 990 for the following common problems:
Statement of Functional Expenses (Part II): In this section the organization must classify all expenses as one of three types: Program Services, Management & General, or Fundraising. We know one organization that put almost all expenses into “Management & General” because their work was done by management-level staff; in fact, such work was more appropriately classified as “Program Services.” If the percentages for either Fundraising or Management & General appear too high, go back and make sure that your organization used appropriate guidelines when classifying expenses.
Addresses of board members: Part V of the 990 asks for a “list of names and addresses of officers, directors, trustees, and key employees.” It is NOT necessary to list home addresses, and many board members and staff members feel that doing so encourages invasion of privacy. It IS appropriate to use the organization’s business address in this section for all board and staff members.
Let your work show your mission. In Part III, “Statement of Program Service Accomplishments,” the 990 asks for a statement of the organization’s purpose and a list of program activities (examples: public awareness campaign, medical research work, home meal delivery, youth training, forest trail construction). Take the time to be sure that what you say here is what you would say to the press or the public or the IRS . . . after all, that IS the audience for the 990.
Check the math. (Especially if you’re an education organization!) In one study of 990s, 67% had significant arithmetic errors.
Remind staff and other board members that Section 1D of Schedule A need NOT be disclosed to the public. Schedule A (an attachment to the 990) lists the names of major donors and the amounts given. If someone asks for your organization’s 990 and Schedule A, you are required by law to give it to them, but you do NOT need to give them Section 1D of Schedule A that has this information.
Make sure it’s filed on time. Failure to file on time results in rapidly accruing penalties, and board members could be held individually liable for those penalties (even if you have Directors & Officers liability insurance). The board president should check to be sure it is filed on or before the due date (again, 4 and 1/2 months after the close of the fiscal year).
Just as individuals and corporations must file annual “tax returns,” nonprofits must file annual “information returns.” (Churches, government agencies, individuals, and businesses need not file Form 990.) Federal Form 990 (“Return of Organizations Exempt from Income Tax”) and Form 990EZ compile financial information, program activities, names of board members, and other basic information. Form 990EZ is a shortened version of Form 990 for smaller organizations.