AVOID COMMON MISTAKES WITH YOUR FORM 990 FILING

Many tax-exempt organizations make common mistakes in their IRS Form 990 filing, which can easily be avoided. These include:

• Late filing or extension: Calendar year nonprofit organizations (NFPs) are required to file their IRS Form 990, 990-EZ, or 990-PF by May 15, 2025.  If the Organization cannot complete the return by the due date, the return can be extended.  Extensions must be filed using IRS Form 8868 by May 15, 2025.  This gives the Organization until November 17, 2025, to submit the filing. Don’t miss these important deadlines!  Small nonprofit organizations can pay up to $12,000 for a late filing. This grows to $60,000 if the Organization has gross receipts of approximately $1.2M.

 

• Missing or incorrect answers to questions: IRS Form 990 is an informational return, meaning the purpose is to assist the government in collecting data from your Organization rather than taxes. The return is full of questions that need to be answered.  It’s important that each question be carefully reviewed and answered truthfully. It’s also important to understand which answers might present the Organization in an unfavorable manner and how to address these so that risk is reduced or eliminated.

 

• Missing or incomplete schedules: Certain answers to the questions on the Form 990 will trigger the requirement for additional schedules. Many organizations are required to file Schedule A (Public Charity Status), Schedule B (Schedule of Contributors), Schedule G (Supplemental Information Regarding Fundraising), Schedule J (Compensation Information), and Schedule O (Supplemental Information). Each of these schedules come with a separate set of instructions and questions for the Organization to address.

 

• Incorrect Compensation Information: It’s important that your Organization completes Form 990 Part VII, Section A correctly.  This section addresses compensation with respect to current and former officers, directors, trustees and key employees. This section also discloses the highest compensated employees that have reportable compensation of at least $100,000.  This section has many intricacies that cause filers to misinterpret the requirements of the instructions.

 

• Failing to take credit for what you have done: There are many areas of the IRS Form 990 that gives the Organization a chance to report accomplishments in the last year.  IRS Form 990 is a public document once filed and can be accessed by any interested party.  Organizations should take advantage of reporting mission, program accomplishments, policies, etc. Typically, grantors and donors access these returns prior to making a pledge or sending support.

As tax professionals, we want to assist you in filing an accurate and quality return.

 

TAX-EXEMPT ORGANIZATION ACCOUNTING AND FINANCIAL REPORTING

We get many questions regarding accounting and financial reporting by tax-exempt entities. It is our objective to address some of the most frequently asked questions in this and future releases.

• Can a nonprofit Organization report a Statement of Financial Position as a Balance Sheet?
  • Generally accepted accounting principles specifically state that either title is acceptable.

 

• Are nonprofit organizations required to present a classified or unclassified Balance Sheet?
  • A nonprofit organization may present either a classified or unclassified Balance Sheet.  However, if the nonprofit organization is defined as a business-oriented healthcare entity, the organization is required to present a classified Balance Sheet.

 

In our next release, we will discuss the OMB’s 2024 Revised Uniform Guidance changes.

If you have any comments or questions regarding nonprofit accounting, financial reporting, or audit requirements, you can reach out to our nonprofit organization team here.