The Nonprofit Leader’s Guide to IRS Form 990 Compliance

Introduction

For nonprofits, IRS Form 990 is more than just a tax return—it’s a key document that showcases transparency, accountability, and financial health. However, navigating the requirements of Form 990 can be overwhelming. Mistakes can lead to penalties, damage your organization’s reputation, or even jeopardize your tax-exempt status. This guide will break down what you need to know about Form 990 and how to file it successfully.

What Is Form 990?

Form 990 is an annual reporting form that federally tax-exempt organizations must file with the IRS. It provides the public with information about your mission, programs, and finances.

• Who Must File: Tax-exempt nonprofits with gross receipts over $50,000. Smaller organizations may file Form 990-N or 990-EZ.

• Why It Matters: It demonstrates compliance, builds donor trust, and helps the IRS confirm your nonprofit's tax-exempt status.

Common Mistakes Nonprofits Make with Form 990

1. Missing the Deadline

   • Why It’s a Problem: Late filings can result in fines or loss of tax-exempt status.

   • How to Avoid It: Mark your calendar—Form 990 is due 4.5 months after the end of your fiscal year (e.g., May 15 for a calendar year-end).

2. Inaccurate Reporting

   • Why It’s a Problem: Errors in financial statements or program descriptions can raise red flags with the IRS and donors.

   • How to Avoid It: Double-check numbers and ensure all activities are accurately described. Use professional accounting software or outsource to an expert.

3. Not Reporting Fundraising Activities Properly

   • Why It’s a Problem: Misreporting can lead to penalties or misrepresentation of your financial health.

   • How to Avoid It: Clearly document all fundraising income and expenses separately from program revenue.

4. Omitting Governance Information

   • Why It’s a Problem: The IRS looks at governance practices to determine nonprofit accountability.

   • How to Avoid It: Include details about your board, policies, and executive compensation in the form.

5. Failing to Review Public Disclosures

   • Why It’s a Problem: Form 990 is a public document, and errors can harm your reputation.

   • How to Avoid It: Review the form with your team and ensure it aligns with your public messaging and values.

Tips for Simplifying Form 990 Compliance

1. Stay Organized Year-Round

   • Keep detailed records of income, expenses, and program activities throughout the year to avoid a last-minute scramble.

2. Leverage Technology

   • Use nonprofit accounting software to track relevant data automatically.

3. Outsource to Experts

   • Consider partnering with a professional accounting firm (like us!) to handle Form 990 preparation, so you can focus on your mission.

Conclusion

Filing Form 990 doesn’t have to be stressful. With the right preparation and support, you can use it as an opportunity to showcase your nonprofit’s impact and financial stewardship.

👉 Need help with Form 990 or other accounting challenges? Black Belt Business Services specializes in nonprofit accounting. Contact us for a free consultation today!