5 Steps To Fill Out Form 990 Successfully

Quick Links :

The world of nonprofit organizations is a complex one, filled with regulations and paperwork that can be daunting for even the most seasoned professionals. One of the most important forms that nonprofits must file each year is Form 990, also known as the Return of Organization Exempt from Income Tax. This form is used by the Internal Revenue Service (IRS) to gather information about a nonprofit's financial activities, governance, and compliance with tax laws. In this article, we will provide a step-by-step guide on how to fill out Form 990 successfully.

Understanding the Importance of Form 990

Form 990 is a critical document that provides the IRS and the public with information about a nonprofit's financial health, governance practices, and compliance with tax laws. The form is divided into several sections, each of which requires careful attention to detail and accuracy. By understanding the importance of Form 990, nonprofits can ensure that they are providing the necessary information to maintain their tax-exempt status and build trust with their stakeholders.

Benefits of Filing Form 990

Filing Form 990 provides several benefits to nonprofits, including:

• Maintaining tax-exempt status: The IRS uses Form 990 to determine whether a nonprofit is eligible to maintain its tax-exempt status.
• Building trust with stakeholders: By providing transparent and accurate financial information, nonprofits can build trust with their donors, volunteers, and other stakeholders.
• Demonstrating accountability: Form 990 requires nonprofits to report on their financial activities, governance practices, and compliance with tax laws, demonstrating their accountability to the public.

Step 1: Gather Required Documents and Information

Before starting to fill out Form 990, it is essential to gather all the required documents and information. This includes:

• Financial statements: Nonprofits must provide their financial statements, including their balance sheet, income statement, and statement of functional expenses.
• Governance documents: Nonprofits must provide information about their governance practices, including their bylaws, articles of incorporation, and conflict of interest policy.
• Tax documents: Nonprofits must provide their tax documents, including their W-2 forms and 1099 forms.
• Other documents: Nonprofits may need to provide other documents, such as their annual report and fundraising plan.

Required Documents Checklist

Here is a checklist of the required documents and information that nonprofits need to gather:

• Financial statements
• Governance documents
• Tax documents
• W-2 forms
• 1099 forms
• Annual report
• Fundraising plan

Step 2: Complete Part I of Form 990

Part I of Form 990 requires nonprofits to provide information about their financial activities, including their income, expenses, and assets. This section includes:

• Line 1: Gross receipts
• Line 2: Contributions, gifts, and grants
• Line 3: Program service revenue
• Line 4: Other revenue
• Line 5: Total revenue
• Line 6: Total expenses
• Line 7: Net assets

Part I Checklist

Here is a checklist of the information required in Part I of Form 990:

• Gross receipts
• Contributions, gifts, and grants
• Program service revenue
• Other revenue
• Total revenue
• Total expenses
• Net assets

Step 3: Complete Part II of Form 990

Part II of Form 990 requires nonprofits to provide information about their governance practices, including their leadership, management, and governance policies. This section includes:

• Line 1: Number of voting members of the governing body
• Line 2: Number of independent voting members of the governing body
• Line 3: Presence of a conflict of interest policy
• Line 4: Presence of a whistleblower policy
• Line 5: Presence of a document retention and destruction policy

Part II Checklist

Here is a checklist of the information required in Part II of Form 990:

• Number of voting members of the governing body
• Number of independent voting members of the governing body
• Presence of a conflict of interest policy
• Presence of a whistleblower policy
• Presence of a document retention and destruction policy

Step 4: Complete Part III of Form 990

Part III of Form 990 requires nonprofits to provide information about their financial activities, including their program expenses, management and general expenses, and fundraising expenses. This section includes:

• Line 1: Program expenses
• Line 2: Management and general expenses
• Line 3: Fundraising expenses
• Line 4: Total functional expenses
• Line 5: Net assets

Part III Checklist

Here is a checklist of the information required in Part III of Form 990:

• Program expenses
• Management and general expenses
• Fundraising expenses
• Total functional expenses
• Net assets

Step 5: Review and Submit Form 990

Once all the sections of Form 990 have been completed, nonprofits must review and submit the form to the IRS. This includes:

• Reviewing the form for accuracy and completeness
• Ensuring that all required documents and information are included
• Submitting the form electronically or by mail

Submission Checklist

Here is a checklist of the steps required to submit Form 990:

• Review the form for accuracy and completeness
• Ensure that all required documents and information are included
• Submit the form electronically or by mail

In conclusion, filling out Form 990 requires careful attention to detail and accuracy. By following these 5 steps, nonprofits can ensure that they are providing the necessary information to maintain their tax-exempt status and build trust with their stakeholders. Remember to review and submit the form on time to avoid penalties and fines.