What is Form 990?
Form 990, or officially Return of Organization Exempt From Income Tax, is an Internal Revenue Service (IRS) form that requires some organizations that are exempt from paying federal income tax need to complete and file to report their activities. These tax-exempt organizations must file Form 990 if they have gross receipts of at least $200,000 or assets worth at least $500,00.
There are organizations that are exempt from filing an annual Form 990. These organizations include political organizations, churches, and other religious organizations. Nevertheless, even organizations that are exempt from paying federal income tax have to inform the IRS of their activities annually as required by the federal tax agency according to its Internal Revenue Code (IRC).
To know if your organization should use Form 990, you may review Section 501(c), Section 527, and Section 4947(a) of the IRC.
As Form 990 is being used to give an overview of the activities of an organization and its financial information, it outlines its achievements in the past year to justify maintaining its tax-exempt status. Through the form, the IRS confirms the eligibility of an organization to continue to qualify for tax exemption.
While federal income tax returns are private, Form 990 is open to public inspection, as organizations that use the form are considered as public groups. Form 990 provides the government and interested members of the public with an overview of a certain organization’s activities. Some donors base their donations and gifting decisions on the declared information on Form 990. The IRS classifies public organizations as charitable organizations, political organizations, and nonexempt charitable trusts. If a foundation is classified as private, it is not required to file Form 990. Private foundations have their own annual filing requirement and use Form 990-PF.
While an organization reaps many benefits from being exempt from paying federal income tax, the IRS ensures that it is worthy of maintaining its tax-exempt status. Form 990 helps the federal tax agency to determine the qualifications of organizations to become tax-exempt.
A significant portion of Form 990 requires accurate information on the way an organization is governed. In fact, it requires not only the expenses of an organization incurred during its activities but also the compensation of those who govern it, such as its officers, directors, highly compensated employees, and the people involved in managing the organization. An organization that overcompensates its management may lose its tax-exempt status. All in all, Form 990 primarily allows the IRS to ensure that organizations continue to qualify for tax exemption after given the status.
How to Fill Out Form 990?
Form 900 consists of 12 parts that require an extensive amount of information from the submitting organization. The additional document that details the instructions on how to fill out the form has 100 pages. Form 900 is one of the longest IRS forms.
Be sure to answer all the required parts accurately and truthfully, as providing any false information may result in penalties, or worse, the revocation of the tax-exempt status of your organization.
Follow the guide below to fill out Form 990 accurately.
Section A requires the beginning and ending months and years of the accounting period.
Section B lets you choose any applicable information that you would like the IRS to know — Address Change, Name Change, Initial Return, Final Return / Terminated, Amended Return, or Application Pending.
Section C requires the name and address of the organization.
Section D requires the Employer Identification Number of the organization.
Section E requires the telephone number of the organization.
Section F requires the name and address of principal officer.
Section G asks for the gross amount of receipts.
Section H asks for information regarding group returns, if applicable.
Section I asks for the tax-exempt status — 501(c)(3), other 501(c), 4947(a)(1), or 527 — of the organization.
Section J asks for the official website of the organization.
Section K asks for the classification of the organization — Corporation, Trust, Association, or Other and specify.
Section L asks for the year of formation of the organization.
Section M asks for the state of legal domicile.
Part I Summary
This section requires the activities and governance, revenue, expenses, and net assets or fund balances of the organization.
Part II Signature Block
This section lets an officer of the organization attest under penalty or perjury that every information provided on the form is accurate. According to the IRS, the form may be signed by the current president, vice president, treasurer, assistant treasurer, chief accounting officer, or other corporate officer authorized to sign as of the date the form is filed.
Part III Statement of Program Service Accomplishments
This section requires reporting the program service accomplishments of the organization. According to the IRS, a program service is an activity of an organization that accomplishes its exempt purpose.
Part IV Checklist of Required Schedules
This section contains yes-or-no questions that the organization must answer accurately and honestly. It contains a checklist of schedules that may require supporting documents.
Part V Statements Regarding Other IRS Filing and Tax Compliance
This section is to provide the necessary IRS filing and tax compliance information.
Part VI Governance, Management, and Disclosure
This section needs information regarding the governing body and management of the organization and its policies.
Part VII Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors
This section lists compensation-related information of individuals and independent contractors.
Part VIII Statement of Revenue
This section reports the revenue from related or exempt funds and unrelated business income of the organization.
Part IX Statement of Functional Expenses
This section is used to report the expenses of the organization.
Part X Balance Sheet
This section is used to show the balance sheet of the organization.
Part XI Reconciliation of Net Assets
This section is used for reconciliation of net assets.
Part XII Financial Statements and Reporting
This section reports and elaborates on the financial statements and reporting of the organization.