When the IRS instituted annual reporting requirements for non-profit organizations, you might have thought they were bringing the famous Oscar Wilde quote ("No good deed goes unpunished") to fruition. While the need to track the progress of 501(c) organizations may cause some headaches, it can be a timely opportunity to effectively review the goals of the mission and ensure that good governance practices are in place. Here’s everything non-profit managers need to know to prepare for tax season.
Form Matters
Form 990 - Return of Organization Exempt from Income Tax is required each year to maintain non-profit tax status. Some of the information on the form includes:
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Compliance with federal tax laws, including payroll and other compensation to directors, vendors, contractors, and employees
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Governance practices include policies and procedures that promote transparency and accountability within the organization
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Narrative of faithfulness to the mission and the best practices to achieve set goals
To complete Form 990, there are a few essential items you must have on hand:
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The organization's legal name, address, and Taxpayer Identification Number (TIN)
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Any DBA or other names used
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Website address
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Name and address of a principal officer
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Previous forms 990 for reference
Maintaining an electronic file containing the most up-to-date information can save valuable time and stress when it’s time to complete Form 990.
Money Matters
One of the first steps in completing the IRS Form 990 is determining which version of the form to use. The primary form is the 990, but there’s many more, including the 990-EZ, 990-PF, and 990-N, among a nearly complete alphabet of accompanying schedules.
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Private foundations, compared to public charities, are required to file a Form 990-PF
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Small organizations, such as those with receipts totaling less than $50,000 annually, may need to file Form 990-N Electronic Notice
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Non-profits with total assets less than $500,000 and gross receipts less than $200,000 may file the short Form 990-EZ
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Organizations with receipts greater than $200,000 or assets greater than $500,000 are required to file the Long Form 990
Gross receipts include monies received from all sources, donations, interest, sales of assets, etc. Expenses for the tax period are accounted for separately from the organization's receipts. Regarding those expenses, you'll need to include the following required documentation:
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A list of compensation to Officers, Directors, Trustees, and Employees
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A list of employees who are most highly compensated
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Compensation to independent contractors and vendors (particularly to those who are most highly compensated)
Writing Matters
"To be persuasive we must be believable; to be believable we must be credible; to be credible we must be truthful."
A few portions of Form 990 require submission of several narratives.
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Brief statement (one or two sentences) summing up the organization's mission or most significant activities
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Slightly longer second paragraph regarding the mission and goals of the organization
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Three narratives of your choice describing the program's accomplishments for those that are served by the organization
Since Form 990 is made available to the public each year, it is important to write the narratives in a way that will be compelling to potential supporters, as Form 990 is often viewed as a helpful tool for recruiting supporters. Finally, it's important to require the organization to conduct a full Board of Directors review of Form 990 before filing to ensure compliance with all organizational and governmental requirements.
The IRS page of information regarding required filings for non-profit organizations is a helpful tool for getting organized for your Form 990 filing. The team at Myrick CPA is highly experienced in required filings for non-profit organizations. To get started, contact them today to set up an appointment.