Nonprofits and the Revised IRS Form 990

Here's what nonprofits need to know about the revised IRS Form 990.

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Nonprofit, tax-exempt 501(c)(3) organizations that are required to file the annual informational tax return called the Form 990 will, as of 2009, find themselves facing a new version of the form. Here's how to gather the necessary information to successfully and easily file the return.

The Importance of IRS Form 990

The revised Form 990, just like the previous version, is an informational return that most nonprofit, tax-exempt organizations have to file annually with the IRS, five months after the close of their fiscal year. Completing and filing the Form 990 is an important aspect of a tax-exempt organization's life cycle, because it serves two functions for two important audiences.

  • Informs the IRS. The Form 990 provides the IRS with information about your nonprofit's activities and financial status in order to demonstrate that your nonprofit still meets the qualifications for tax-exemption.
  • Informs the public. The Form 990 informs the public about crucial aspects of your nonprofit. Most of the pages and tables are available for public inspection, including those describing executive compensation and program expenditures. Potential donors and grantors can, and many routinely do, look at an organization's Form 990 before making decisions about charitable giving. The media and nonprofit-watchdog groups may also check out 990s.

Does Your Nonprofit Have to File the New Form 990?

Most tax-exempt organizations and nonexempt charitable trusts have to file some type of Form 990 informational return. However, there are three general exceptions:

Some religious institutions. Some religious institutions, such as churches, aren't required to file Form 990. (Check the exemption letter that your organization received from the IRS to find out for sure.)

Annual receipts less than $25,000. Organizations with annual gross receipts of less than $25,000 aren't generally required to file Form 990. However, they do have to file an electronic postcard form called the Form 990-N, available from the IRS at www.irs.gov (choose "More Forms and Publications" and scroll down until you see "Form 990-N").

Group returns. Organizations that are included in a group return usually don't have to file Form 990.

Transition Period to New Form 990

To phase in the revised form, the IRS established a transition period:

  • For tax year 2008, most organizations with gross receipts of less than $1,000,000 and total assets less than $2,500,000 could choose to file either the new Form 990 or the Form 990-EZ (which wasn't substantially modified).
  • For tax year 2009, most organizations with gross receipts of less than $500,000 and total assets less than $1,250,000 may choose to file either the revised Form 990 or the Form 990-EZ.
  • Beginning in tax year 2010, most organizations with gross receipts of less than $200,000 and total assets less than $500,000 may choose to file either the revised Form 990 or the Form 990-EZ.

Overview of Changes in the Form 990

The latest Form 990 looks significantly different than the old one, and it collects many different pieces of data. The new emphasis is on transparency and the relationship between tax compliance and good corporate governance.

You can find the Form 990 and instructions on the IRS's website at www.irs.gov -- click "More Forms and Publications" tab on the IRS home page.

The core form. The new format contains a core form of 11 parts, which all filing organizations must complete. The core form requests financial data as well as information on your organization's programs. It also contains a formal checklist (in Part IV) to help you figure out which schedules to fill out and attach to your return.

The summary sheet. Another significant change in format is the addition of a summary sheet, which serves as the first page of the Form 990. The summary sheet pulls together all the information from the core form and the schedules, providing a quick snapshot of the organization. One of the sections in this new summary sheet allows the organization to highlight either its mission or its significant activities -- this can be important for fundraising and marketing purposes.

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