Form 990 filing requirements: Tips and tricks for nonprofits

Wondering if your organization needs to file Form 990? Understanding the Form 990 filing requirements is more than just a formality–it’s a chance to showcase your nonprofit’s transparency and IRS compliance.

If you’re part of your nonprofit’s finance team, you already know how crucial it is to stay on top of Form 990 filing requirements to maintain your tax-exempt status.

But wouldn’t it be great to tackle this process with a few tips and tricks?

While 501(c)(3) organizations enjoy exemptions from federal income tax–and sometimes state taxes–these benefits come with the responsibility of filing regularly and accurately with the IRS.

Form 990 isn’t just another piece of paperwork; it’s a powerful tool for collecting data about tax-exempt organizations, promoting tax law education, and ensuring compliance.

And more importantly, it’s an opportunity for your non-profit organization to share its mission, celebrate its accomplishments, and demonstrate financial transparency – all key factors that build donor trust and boost your organization’s credibility.

This article will explore why Form 990 matters and share practical strategies to simplify reporting, save time, and strengthen your nonprofit’s reputation as a transparent and accountable organization.

Here’s what we’ll cover:

What is Form 990?

Form 990 is a cornerstone of your non-profit’s financial reporting. This annual informational tax form is a must for all tax-exempt organizations, providing a clear picture of your non-profit organization’s finances—covering income, expenses, and operations.

It’s a powerful tool that demonstrates your financial accountability to both the IRS and the public.

Think of it this way: Form 990 isn’t just about compliance; it’s your chance to showcase how well your non-profit manages its resources.

By accurately completing this form, your team provides transparency to donors and funders, giving confidence in your fiscal health and the impact of your work.

A well-prepared nonprofit tax form 990 doesn’t just tick the legal boxes–it also strengthens your reputation by highlighting how effectively you use resources to support your mission.

Types of Form 990

As you might have guessed, there’s more than one type of Form 990. The specific 990 forms of nonprofit organizations vary depending on your nonprofit’s size, annual revenue, and the nature of its activities. Here’s a quick rundown:

• Form 990: Larger tax-exempt organizations with gross receipts of $200,000 or more or total assets of $500,000 or more must file the standard version of Form 990. This type includes detailed sections on revenue, expenses, governance, and mission-related activities.
• Form 990-N: This type is a simplified electronic filing designed for small tax-exempt organizations with annual gross receipts of $50,000 or less. It requires minimal information, such as the organization’s name, address, and EIN.
• Form 990-EZ: A shorter version for tax-exempt organizations with gross receipts under $200,000 and total assets under $500,000. This type provides an alternative for mid-sized organizations not qualifying for the 990-N.
• Form 990-PF: This version is specifically for private foundations, regardless of income level. It requires detailed reporting on grant distributions, investments, and compliance with specific IRS regulations.

Who is required to file form 990?

If your organization is tax-exempt, chances are you’re required to file Form 990 every year to stay compliant with IRS regulations. Filing the right version of the form helps you meet nonprofit filing requirements, avoid mistakes, and steer clear of penalties.

Do nonprofits have to file state tax returns too?

While Form 990 is a federal requirement, your nonprofit may also need to file state tax returns, depending on state-specific regulations.

Many states rely on Form 990 for regulatory oversight, so it is essential to understand how to file nonprofit taxes accurately as part of your overall compliance strategy.

For example, if your nonprofit operates in California, you’ll likely need to file additional forms, such as the California Form RRF-1, to meet state-specific reporting requirements.

Similarly, other states may require separate filings, depending on your activities and revenue.

Be sure your finance team checks with your state’s tax authority to confirm what’s required. Staying on top of federal and state obligations ensures your nonprofit remains fully compliant and avoids unexpected issues.

Who is exempt from filing form 990?

Curious if your nonprofit might be off the hook for filing Form 990? Some organizations are indeed exempt from this requirement. Here’s a quick list of who doesn’t need to file:

• Religious organizations
• Governmental entities (Nonprofits closely tied to government operations or those receiving substantial government funding)
• Small nonprofits (Organizations with gross receipts less than $5,000)

If your organization falls into one of these categories, you’re in the clear–but it’s always a good idea to double-check with the IRS or a tax professional to be sure.

When is the Form 990 filing deadline?

Grab your calendar and mark the date–it’s time to plan ahead! The deadline for filing Form 990 is the 15th day of the 5th month after your nonprofit’s financial year ends.

For example, if your fiscal year concludes on December 31st, your From 990 would be due by May 15th.

What happens if you file Form 990 late?

Missing the deadline results in penalties, ranging from monetary fines to losing your organization’s tax-exempt status. The IRS may charge late fees of $20 per day, up to $10,000 or 5% of gross receipts, whichever is lower.

For larger nonprofits, the stakes are even higher, with penalties reaching $100 per day, up to $50,000.

If you’re running into challenges or need more time, make sure to request an extension to avoid these costly consequences.

Who can view my nonprofit’s Form 990?

Accuracy is crucial because, yes, this document is open to public. Once the IRS processes and publishes it, your Form 990 becomes publicly available for at least three years after filing.

Since anyone can view this form, its essential to be cautious and avoid including personal or sensitive information. Protecting the privacy of individuals connected to your organization is just as important as ensuring compliance. Staying mindful of this helps maintain trust while keeping your nonprofit secure.

Loss of tax-exempt status

If your nonprofit loses its tax-exempt status, it is no longer eligible for tax-deductible contributions. Depending on your organization’s size and the state in which it operates, you may be required to pay corporate income tax.

Losing tax-exempt status can lead to increased scrutiny, compliance challenges, and potential penalties. If you miss deadlines and lose your status, act quickly to address the issue and work toward regaining compliance as soon as possible.

How to handle Form 990 when your nonprofit conducts an independent audit

Every nonprofit operates differently, so if your organization conducts an independent financial audit, it’s essential to take specific steps to make sure your Form 990 is accurate and complete.

Follow these recommendations to streamline the process:

1. Gather financial documentation: Start by collecting all the financial documents required for the audit. This preparation will make it easier for your finance team to compile the information needed to file Form 990.
2. Complete the financial audit first: Conduct the financial audit before filing Form 990. The audit results provide verified financial data, ensuring your Form 990 is accurate and complete.
3. File for an extension if needed: If completing the audit causes delays and you can’t meet the filing deadline, don’t stress! File for an extension to give your team the time needed to submit an accurate tax return.

Why is Form 990 important?

Form 990 gives your nonprofit a platform to showcase its financial health, programs, and accomplishments. By filing Form 990, your organization builds donor trust, attracts new funding, and ensures compliance with IRS and state regulations.

That said, managing Form 990 can get tricky, especially when dealing with unrelated business income (UBI). UBI includes revenue from activities unrelated to your nonprofit’s mission, like selling goods or renting space.

Tracking and reporting UBI accurately is crucial, as it may be taxable and must be disclosed on IRS Form 990-T, the “Exempt Organization Business Income Tax Return.”

How to file 990 forms for nonprofit organizations

In the past, filing 990 forms for nonprofit organizations meant doing everything manually—gathering financial records, filling out the form by hand, and mailing it to the IRS.

Thankfully, things are much easier now! The IRS now requires electronic filing, which simplifies the process and helps reduce errors.

Your finance team can file Form 990 electronically through the IRS e-file system. Consider using accounting software to make the process smoother, especially when managing complex revenue streams or UBI.

Accounting software helps your team track income, categorize it accurately, and prepare financial data for year-end reporting. Many tools also offer a Form 990 template that further streamlines the filing process, saving time and reducing the risk of errors.

Filling Form 990 best practices

Filing Form 990 doesn’t have to be stressful. By following some best practices, your nonprofit’s finance team can navigate the process with ease and confidence.

1.    Simplify functional expense reporting

Filing From 990 isn’t just about filling out one document but also preparing complementary reports. One important report your team needs to be aware of is the Statement of Functional Expenses.

This report shows how your nonprofit’s expenses are allocated across different functional areas. To complete Form 990, you’ll need to categorize expenses into these three main areas:

1. Program services: Any costs associated with executing mission-driven programs and services.

2. Administration and management: Operational expenses like rent, salaries, utilities, and supplies.

3. Fundraising: Costs directly tied to raising money.

These expenses don’t always fall squarely into a sole category and, therefore must be allocated using a clear and consistent process. For example, nonprofit personnel often spread their time over multiple functions.

If a full-time employee spends three days a week on administrative tasks and two days providing mission-driven services, you’d allocate 60% of their salary to administrative expenses and 40% to program expenses.

Simplify these calculations with the right tools to keep your nonprofit on track. Software with dynamic allocation features makes it easy to view original postings, as all allocations are completed on a user-defined book.

However, if you’re handling allocations at the end of a reporting period—or even less frequently—you may lack the visibility needed for compliance.

This visibility is especially important when referencing unallocated federal and state award numbers.

Additional considerations for functional expenses reporting

When it comes to functional expense reporting, there are a few additional factors to keep in mind. As part of your nonprofit’s finance team, you clearly understand your organization’s unique situation.

Here are some considerations that may or may not apply to your organization:

• Negotiated indirect cost rate allowance: If your nonprofit receives a lot of federal grants, you may be used to preparing a different functional expense report for financial reporting to funding agencies than what’s required for Form 990. However, financial reporting rules have been aligned, and all nonprofits must create a Statement of Functional Expenses report.
• Contra revenue accounts: Automating the tracking and reporting of contra revenue also ensures accurate and compliant reporting. A very common mistake occurs when nonprofits include only expense accounts but leave out contra revenue. For example, with special events, it is common for income and expenses to be netted together in the top part of the income statement.  It’s not shown in one of your functions. So, you will need to add expenses back in and show their function—in the case of special events, the function would be fundraising.

2.    Review Form 990 before filling

Before you hit “submit,” take a moment to pause and review your Form 990.

A thorough review ensures your filing is accurate and effective. Involve other members of your organization in the review process—it’s always helpful to have fresh perspectives.

When reviewing, encourage your team to focus on these key areas:

• Clearly describe your mission: Use plain and simple language to articulate your nonprofit’s mission and make it clear to the IRS, donors, and other stakeholders.
• Highlight your nonprofit’s story: Showcase your organization’s achievements and governance practices.
• Focus on good governance: Aim to respond positively to the questions about good governance on Form 990. These answers reflect your organization’s commitment to accountability and sound management practices.
• Engage your board of directors: Make sure your entire board reviews the draft before submission. Having multiple knowledgeable people look it over can help catch errors and ensure everything is accurate before it becomes publicly available.

3.    What not to include

Now that you know what to include in your Form 990, it’s just as important to know what not to include. Being mindful of what to leave out can protect your organization and the individuals associated with it.

Here’s what to avoid:

• Sensitive personal information: Do not include personal identifying details such as social security numbers, personal addresses, or other private information that could compromise the privacy of individuals associated with your nonprofit.
• Confidential or copyright-protected information: Avoid disclosing confidential data, trade secrets, or copyrighted publications.

Boost efficiency in your Form 990 reporting with accounting software

Even though your team knows the ins and outs of filing Form 990, using the right digital tools can make the process much easier.

Automating your reporting saves time, minimizes errors, and helps your nonprofit stay compliant without the hassle. With our nonprofit accounting software, you can optimize tracking, organization, and reporting, allowing your team to focus on achieving your mission.