Form 990 Preparation Tips

form 990 instructions

An excise tax equal to 10% of the excess benefit can be imposed on the participation of an organization manager in an excess benefit transaction between an applicable tax-exempt organization and a disqualified person. This tax, which can’t exceed $20,000 for any single transaction, is only imposed if the 25% tax is imposed on the disqualified person, the organization manager knowingly participated in the transaction, and the manager’s participation was willful and not due to reasonable cause. An organization manager can be liable for both the tax on disqualified persons and on organization managers in appropriate circumstances. Most section 501(c)(3), 501(c)(4), or 501(c)(29) organization employees and independent contractors won’t be affected by these rules.

Tax-exempts with gross receipts of $50,000 or less may electronically file a Form 990-N e-postcard. An organization may use any reasonable method in making a good faith estimate of the value of goods or services provided by that organization in consideration for a taxpayer’s payment to that organization. A good faith estimate of the value of goods or services that aren’t generally available in a commercial transaction may be determined by reference to the FMV of similar or comparable goods or services. Goods or services may be similar or comparable even though they don’t have the unique qualities of the goods or services that are being valued. An organization must provide a written disclosure statement to donors who make a quid pro quo contribution in excess of $75 (section 6115). This requirement is separate from the written substantiation acknowledgment a donor needs for deductibility purposes.

Form 990 data published by IRS

In “IRS Speak” the 990 Form is the annual reporting tax return document required to be filed by all federally tax-exempt organizations. This form is the way the government (via the IRS) ensures your compliance and evaluates how your institution is doing financially. Form 990 must be filed by an exempt organization, even if it has not yet filed Form 1023 with the IRS to receive official approval of its tax-exempt status. However, there are certain organizations that are exempt from filing the form. Unlike income tax returns that are private, this form is open to public inspection. It includes information about your organization’s revenue, expenditures, and governance.

Report membership dues paid to obtain general membership benefits from other organizations, such as regular services, publications, and other materials, on line 24. This is the case if a charitable organization pays dues to a trade association comprised of otherwise unrelated members. Dues paid by a local organization to its affiliated state or national (parent) organization are reported on line 21. Report on this line predetermined quota support and dues (excluding membership dues of the type described below) by local agencies to their state or national organizations for unspecified purposes, that is, general use of funds for the national organization’s own program and support services. Enter contributions by the filing organization, common paymasters, and payroll/reporting agents to the filing organization’s employee benefit programs (such as insurance, health, and welfare programs that aren’t an incidental part of a pension plan included on line 8), and the cost of other employee benefits.

How to Read Form 990: Return of Organization Exempt From Income Tax

For this purpose, don’t include any investment income received from investing proceeds that are technically under the control of the governmental issuer. For example, proceeds deposited into a defeasance escrow that is irrevocably Fund Accounting 101: Basics & Unique Approach for Nonprofits pledged to pay the principal and interest (debt service) on a bond issue isn’t under the control of the organization. Rental income from an exempt function is another example of program-related investment income.

form 990 instructions

15-A, Employer’s Supplemental Tax Guide, for distinguishing employees from independent contractors. C is an attorney employed by a law firm that isn’t a related organization to the organization. The organization and the law firm enter into an arrangement where C serves the organization, a section 501(c)(3) legal aid society pro bono, on a full-time basis as its vice president and as a board member while continuing to receive her regular compensation from the law firm. The organization doesn’t provide any compensation to C for the services provided by C to the organization, and doesn’t report C’s compensation on Form W-2, Form 1099-NEC, or Form 1099-MISC.

Instructions to complete Form 990 Part XI – Reconciliation of Net Assets

X has the highest reportable compensation from the organization and related organizations of all employees other than the 20 key employees. X must be listed as one of the organization’s five highest compensated employees. Organizations that file Form 990 must make it publicly available for a period of 3 years from the date it is required to be filed (including extensions) or, if later, is actually filed. Organizations aren’t required to make publicly available the names and addresses of contributors (as set forth on Schedule B (Form 990), and on Form 1023, 1023-EZ, 1024, or 1024-A). Section 501(c)(3) organizations that file Form 990-T are also required to make their Forms 990-T publicly available for the corresponding 3-year period for forms filed after August 17, 2006 (unless the form was filed solely to request a refund of telephone excise taxes).

An established fund of cash, securities, or other assets to provide income for the maintenance of a not-for-profit entity. The use of the assets of the fund may be with or without donor-imposed restrictions. Endowment funds are generally established by donor-restricted gifts and bequests to provide a source of income perpetuity or for a specified period. Alternatively, a not-for-profit’s governing board may earmark a portion of its net assets (see Quasi-endowment).

Return of Organization Exempt From Income Tax – Notices

And again, if you fail to correct this information within the IRS’s given time frame, you can even incur penalties. Enter the total revenue, expenses, net assets, or fund balances at the beginning of the year, gains, investment expenses, net assets, or fund balances to reconcile the Net Assets. Use Schedule O (Form 990-EZ or 990) to provide required supplemental information as described in this part, and to provide any additional information that the organization considers relevant to this part. There are 38 lines in the part which are required to complete by Nonprofits. Check in detail against each line to complete this part. When section 501(c)(3) organization has met the 33 1/3% support test of the regulations under sections 509(a)(1) and 170(b)(1)(A)(vi), checks the box on Schedule A (IRS Form 990 or 990-EZ), Part II, line 13, 16a, or 16b, and received more than $5000 as a contribution from a single contributor, the organization must attach Schedule B.

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