Being grant-ready is more than just having your 501(c)(3) tax exemption, letter of determination, or charity registration; it’s having a great board, building great programs such as community outreach initiatives, educational workshops, or health awareness campaigns, ensuring financial records are in order, and more. Securing grant funding is crucial for nonprofit sustainability and growth but requires more than a compelling mission. Here’s a friendly guide to ensure your nonprofit is primed and ready to impress funders.

1. Keeping Current Financial Records

First and foremost, your financial house must be in order. Financials and record-keeping should always be a top priority for the organization. Keeping good financial records means having up-to-date financial statements, including a detailed budget, profit and loss statement, and balance sheet. Funders want to see that you manage your finances responsibly and transparently, further instilling confidence in your organization and ensuring the security of your investment. Investing in good accounting software and conducting regular audits can make a significant difference, providing protection and confidence in your financial management.

2. Is your Mission and Impact Clear?

Your mission should be a beacon of inspiration, clear, concise, and impactful. It should speak to what you will do and the profound impact of your actions. Funders need to understand what you do and why it matters. Be ready to provide evidence of your impact, such as success stories, statistics, and outcomes. Demonstrating a track record of success builds credibility and trust and inspires and motivates your team and potential funders, instilling a sense of inspiration and motivation in your mission.

3. Do you have a Strategic Plan

A well-thought-out strategic plan is your organization’s manifesto of capability. It shows funders that you’re not just reacting to problems but proactively planning for the future. Including a proactive approach to the future gives funders insight into the organization’s ability and capability. This plan should outline your goals, strategies to achieve them, and how you’ll measure success. A strategic plan is a roadmap to ensure effective use of donor funding, making you feel prepared and proactive, ready to face the future with confidence.

4. Committed and Strong Board Governance

A committed and active board of directors is your organization’s fortress. Funders look for boards that provide oversight, support, and diverse perspectives. Ensure your board members are engaged and knowledgeable about your organization’s mission and operations. This strong governance structure is the bedrock of trust and security for your funders.

5. Prepare a Compelling Grant Proposal

Writing a winning grant proposal is an art. Your proposal should be clear, compelling, and tailored to the funder. Highlight how your project aligns with their priorities and demonstrate your capacity to deliver. Don’t forget to proofread for clarity and errors!

6. Donor and Funder Engagement

Building relationships is crucial for any funding situation, and doing so before you need money can be incredibly beneficial. Proactive relationship-building can include attending networking events, joining nonprofit associations, and contacting potential funders to introduce your organization. It’s about keeping these connections warm by updating them on your organization’s progress and expressing gratitude for their support. Establishing a rapport can make your grant application stand out and lead to long-term partnerships that benefit your organization beyond just the funding.

7. Are you Ready to Scale?

In the nonprofit world, scalability also refers to Capacity Building. It’s about being prepared for growth and being able to handle it. If your organization had additional funding, would it be adequately staffed? Would it have the proper infrastructure, technology, systems, and processes? If not, how quickly can it be ready? These are the questions funders will be asking, and having clear answers to them will demonstrate your organization’s readiness to scale and manage the grant effectively.

Scenario: The organization applies for a grant that will yield $150,000 for a tutoring program; however, the organization has no curriculum built and no teachers/volunteers to run the program. The presented scenario does not give the organization the best position to win the grant.

Funders want to know if you can manage the grant effectively by having visibility into it—the right staff, infrastructure, and systems in place. Sometimes, securing smaller grants can help build your organization’s capacity and credibility.

Grant Funding Readiness Requires Preparation

One of the biggest hurdles nonprofits face when applying for grants is a lack of readiness. Misconceptions about how easy it is to secure grant funding can lead to frustration and missed opportunities. Nonprofits that are not financially stable or don’t have a strong track record of managing funds are less likely to win grants.

To be “grant ready,” your nonprofit should have:

• A clear and compelling mission
• Financial stability from multiple sources
• Strong governance with an engaged and knowledgeable board
• Program outcomes and data that show measurable impact

Ensuring your organization is fully prepared to seek grants will put you ahead of those who jump into the process without proper planning.

Tip: Before applying for grants, ensure your nonprofit has a strategic plan, a clear budget, and well-documented success stories or outcomes. This will help you craft compelling grant proposals that are more likely to receive funding.

Learn more about how 501(c)(3) Center can help you launch your nonprofit and much more today!

Running a 501(c)(3) nonprofit organization involves unique financial challenges and opportunities. Effective banking practices are crucial to ensure economic stability and compliance with regulations. For this blog, we’ve chosen three key elements on how to choose the right bank for new nonprofits.

Choosing the Right Bank

Choosing the right bank is vital; it’s a strategic move for a nonprofit’s financial health. Not all banks are created equal, and some are more equipped to handle the specific needs of a 501(c)(3). You can be confident in your financial decisions by selecting a bank that offers specialized services for nonprofits, such as lower fees, better interest rates on savings accounts, and dedicated account managers. These account managers are experienced professionals who understand the unique financial needs of nonprofits and can provide tailored advice and support. Consider a bank’s reputation for supporting community initiatives and its experience with nonprofit organizations. Establishing a relationship with a bank that understands the unique requirements of nonprofits can lead to better financial management and more tailored advice, giving you the reassurance you need to focus on your mission.

Consider Local Banks

We at 501(c)(3) Center strongly suggest speaking to or considering a local community bank for your nonprofit. At their core, often community banks and nonprofits share similar values and missions: to serve the local community and make their community a better place. Partnering with local nonprofits allows community banks to strengthen their ties and increase both awareness and audiences for their bank and their nonprofit partners. In addition, community banks offer personalized service and dedicated bankers who can get to know nonprofits by name and provide higher customer service. Community banks are more willing to negotiate and work with customers. When interviewing local banks, consider a few things.

• Ask to see if there are any benefits for nonprofits.
• What are their document and ongoing maintenance requirements
• Determine who must be present for signatures

Maintaining Separate Accounts

While having one main account that all funding goes into is easy, nonprofits must maintain clear and transparent financial records. Maintaining separate accounts, including keeping separate bank accounts for different types of funds, is not just a good practice, it’s crucial. This segregation helps in accurate financial reporting, ensures compliance with donor restrictions, and facilitates easier audits. It also allows for better tracking of funds, making it easier to see where money is coming from and where it’s going. Many banks offer tools and services to help manage multiple accounts and track expenses accurately, which is invaluable for maintaining financial integrity.

Understanding and Managing Cash Flow

Cash flow is a term we often hear in business, but for nonprofits, it’s more than just a term; it’s a lifeline. It is the net amount of cash and equivalents an entity receives and disburses during a period. Nonprofits usually experience this fluctuating cash flow due to the seasonal nature of donations and grants. Effective cash flow management is not just essential; it’s a responsibility to avoid shortfalls and ensure the organization can meet its obligations. Develop a cash flow forecast to anticipate periods of surplus and shortage. Utilize banking tools such as lines of credit to provide temporary funding during lean periods. Additionally, consider setting up an emergency fund to cover unexpected expenses. Regularly reviewing and adjusting the cash flow forecast with your bank can help maintain financial stability and your nonprofit’s operations, making you a proactive steward of your organization’s sustainability.

Technology Integration (Bookkeeping, Payroll, etc.)

When choosing a bank partner for your nonprofit, it’s essential to understand what technology or third parties the bank integrates with. For example, if you plan to use bookkeeping software like QuickBooks or MoneyMinder, a bookkeeping system built for nonprofits, integrating your bank accounts can save time and money, reduce errors, and improve cash flow. It also helps you stay organized and informed about your finances, making your financial management more efficient and up to date.

Time and money savings

Automatically syncs transactions, so you don’t have to enter them manually

• Saves time on bookkeeping
• Reduces the risk of errors

Improved cash flow

• Provides real-time insights into your cash flow
• It helps you make informed financial decisions

Enhanced security

• Uses encryption technology to protect your data
• Ensures a secure data transfer between QuickBooks and your bank
• Improved accuracy and reduced errors eliminate the need for duplicate entries and reduce the risk of inaccuracies.
• Improved organization helps you organize bills in one place, automatically categorize your expenses, track business expenses, and prepare for your 990-tax preparation.

Improved reporting

• Helps you run and export reports, including profit & loss, expenses, and balance sheets

Conclusion

In conclusion, a 501(c)(3) nonprofit can ensure financial stability and compliance by choosing the right bank, maintaining separate accounts, effectively managing cash flow, and leveraging technology. These practices safeguard the organization’s assets and build trust with donors and stakeholders, ultimately supporting the nonprofit’s mission and long-term success.

Tips for a Memorable and Effective Brand

Choosing an impactful nonprofit name is a pivotal decision, marking the beginning of your organization’s journey. A powerful nonprofit name is not just a label, but a beacon that guides your mission. It should be clear, concise, and easy to remember, instantly conveying your purpose and inspiring board members, donors, and volunteers to champion your cause.

However, finding the right name can be a delicate balance, especially when it comes to balancing creativity and clarity. Below, 501(c)(3) Center share tips and examples to help you navigate this balance and choose the perfect name for your nonprofit startup.

Aim for Simple and Short Names

A nonprofit name should be a clear and concise representation of your mission. While it can be tempting to include everything about your mission in the name, remember that a succinct name is more likely to be shared and remembered. Your goal is to make it easy for people to discuss and engage with your organization. A long name may get lost in conversation if potential supporters struggle to recite or spell it.

For example, a name like “Emily’s Dog and Cat Rescue of Central Florida” is descriptive but lengthy, with 22 characters. A more concise option would be “Pet Rescue by Emily.” This version shortens the name and leads with the key mission: rescuing pets. Additionally, avoiding location-based names can make it easier to expand in the future without the need for a rebrand.

Consider Using Acronyms

Acronyms can be useful tools for nonprofit naming, but they should make sense in both their shortened and expanded forms. Choose an acronym that aligns with your mission and is easy to remember.

One example is United Against Poverty, a Florida-based nonprofit. It uses the acronym “UP” along with the city name (e.g., UP Orlando) to simplify its name for different locations. This approach maintains the clarity of the full name while incorporating a positive message aligned with the organization’s mission: lifting people “up” and out of poverty.

When using an acronym, avoid making it overly complicated or confusing. The acronym should support your mission rather than detract from it.

Be Clear About Your Mission

The most effective nonprofit name instantly communicates what your organization does with a mission statement. Think about your mission and how you can convey it in just a few words. An explicit name ensures donors, volunteers, and the public understand your purpose when they hear your organization’s name.

For example, “Pet Rescue by Emily” tells potential supporters precisely what the organization focuses on: rescuing animals. It’s straightforward, meaningful, and memorable.

Avoid being vague or overly creative. While clever names can be fun, they may not communicate your mission, making it harder for people to connect with your cause.

Keep Future Growth in Mind

When naming your nonprofit, consider its long-term vision. While including a location in your name (e.g., “Central Florida” in the earlier example) may be tempting, this can limit your ability to expand into other regions. By keeping the name broad and mission-focused, your nonprofit can grow without needing a name change in the future.

Example of Naming Strategy

Let’s break down an example of an effective name transformation:

• Desired Name: Emily’s Dog and Cat Rescue of Central Florida
• Challenges: The name is long and geographically limiting, making it difficult for supporters to share and remember.
• Alternative Name: Pet Rescue by Emily
• Benefits: This shorter, mission-driven name focuses on pet rescue’s core work. It’s clear and concise and allows for expansion beyond Central Florida.
• Website domain: Which website domain would you be easier on the eyes?
  • Emilysdogandcatrescueofcfl.com or
  • Rescuebyemily.com

Final Note

Choosing a nonprofit name requires time and thought. Aim for clarity, brevity, and alignment with your mission. Remember, your name will be the first thing people encounter about your organization, so it should make a strong, positive impression. For assistance with launching your new nonprofit, contact 501(c)(3) Center today!

1. Provide Oversight and Accountability

While nonprofit staff or accountants typically prepare Form 990, the board’s oversight role is of utmost importance. The board is responsible for ensuring the accuracy, completeness, and consistency of the form before submission, aligning it with the organization’s financial reports. This crucial task underscores the board’s integral role in the organization’s operations.

How to Get It Right:

• Regular Reviews:Schedule time for the board to review key financial statements and governance practices throughout the year, not just during tax season. Frequent reviews help ensure that everyone is familiar with the organization’s finances before it’s time to file.
• Audit Committees: Many nonprofits establish an audit or finance committee that works closely with the accounting team to review financial reports and ensure that the 990 aligns with these records.

2. Ensure Transparency and Compliance

The IRS requires specific information on governance, such as details about board members, conflict of interest policies, and executive compensation. The board must ensure these governance disclosures are accurate and transparent to avoid red flags during IRS reviews.

How to Get It Right:

• Update Policies: Ensure that your organization’s governance policies, such as conflict of interest or executive compensation policies, are regularly reviewed and updated. Keeping policies up-to-date makes filing more manageable and ensures that Form 990 reflects current practices.
• Document Board Actions: Keep clear records of board meetings, decisions, and policies throughout the year. These records can be crucial when preparing Form 990 and demonstrating that the board provides active governance.

3. Participate in Financial Planning and Review

The board’s role in financial oversight is not just about review, but also active participation in the organization’s financial planning and review. Since Form 990 includes detailed financial information, the board provides financial oversight and reviews the organization’s budget, expenses, and revenues, making them feel involved and engaged in the organization’s financial health.

How to Get It Right:

• Regular Financial Reporting: Boards should receive regular financial updates from the executive team or finance director. Financial reporting helps ensure that the numbers on Form 990 match the financial performance throughout the year.
• Ask Questions: Board members should ask questions about any financial figures that seem unclear or inconsistent. Active engagement and scrutiny during the review process can prevent errors that raise red flags with the IRS or funders.

4. Stay Informed About Changes to IRS Requirements

Given the IRS’s regular updates to its requirements and the filing process for Form 990, it’s crucial for nonprofit boards to stay informed about these changes. This vigilance is key to ensuring the organization’s full compliance.

How to Get It Right:

• Ongoing Education: Invest in regular training and updates for the board on IRS requirements and changes to Form 990. Partner with nonprofit tax professionals who can advise on best practices.
• Consult Professionals: If your nonprofit’s financial activities are complex, consider hiring a nonprofit accounting firm or tax consultant specializing in Form 990 to ensure compliance with all IRS requirements.

3 Major Tips for Ensuring a Flawless Form 990

1. Plan Ahead: Start the 990-preparation process early by keeping accurate, up-to-date yearly records. Planning ahead ensures that the filing process is smooth and prevents last-minute stress.
2. Use the Expertise of a Finance Committee: If possible, form a finance or audit committeewithin the board that can provide specialized oversight of the organization’s financial management and compliance efforts.
3. Invest in Professional Guidance: Don’t hesitate to seek professional assistance if your organization’s finances are complex or the board lacks IRS reporting experience. Working with a nonprofit consultant or tax advisor can help ensure accuracy and compliance.

Conclusion

The board of directors ensures that a nonprofit’s Form 990 is accurate, timely, and transparent. By providing oversight, reviewing governance and financial details, and staying informed about IRS requirements, board members can protect the organization from compliance issues and reinforce its commitment to transparency. A well-managed 990 filing keeps your organization in good standing with the IRS. It strengthens your credibility with donors, funders, and the public.

How Nonprofit Boards Ensure Tax Compliance and Accuracy

Filing Form 990 is one of any nonprofit organization’s most critical compliance tasks. This form provides the IRS, donors, and the public with crucial information about your nonprofit’s finances, governance, and activities. While the day-to-day management of financial records may fall to staff or external professionals, the board of directors plays an essential role in ensuring the accuracy and completeness of Form 990. A proactive, informed board can help avoid costly mistakes and uphold the organization’s transparency and compliance.

In this post, we’ll dive into the board’s role in ensuring a flawless Form 990 and offer actionable tips on how to make the filing process smoother.

Why Is Form 990 So Important?

Form 990 serves multiple purposes:

• IRS Compliance: This is a required annual report that allows the IRS to assess a nonprofit’s operations and ensure it complies with the rules for maintaining tax-exempt status.
• Transparency: It provides valuable information for donors, funders, and other stakeholders, showcasing the nonprofit’s financial health, governance practices, and accomplishments.
• Public Accountability: Since Form 990 is publicly accessible, nonprofits that file incomplete or incorrect forms can face reputational damage, which may affect donor trust and grant opportunities.

These purposes make it essential for nonprofit boards to actively participate in the process to ensure the accuracy and timeliness of the filing.

Looking for ways to deduct startup costs of a 501(c)(3) nonprofit? You’ve come to the right place!

Founders, initial board members, and donors, did you know that you may be eligible for a tax deduction for your contributions?

Here at the 501c3 Center, we often get asked about the vital role that the founder, board, or initial volunteers of a newly formed 501(c)(3) exempt organization play. Your contributions, both in terms of time and resources, are crucial to the organization’s success. And yes, you can take a tax deduction for personally paying the organization’s expenses during its first year in operation.

The process is Straightforward. A donor may claim a deduction for contributions made “to or for the use of” a charitable organization.

Once the organization has obtained the 501(C)(3) status, you can claim this deduction on your individual or corporate tax return. The organization should acknowledge your payments by issuing donation receipts and confirming in writing that you received no goods or services, such as tickets to an event or a tangible item. The donation receipt details should provide the necessary substantiation letter if ever audited by the IRS.

Helpful resources:

For further guidance, we recommend consulting the IRS Publication 535, Business Expenses: https://www.irs.gov/publications/p535. This resource provides detailed information on business expenses and can help you navigate the tax implications of your contributions.

IRS Publication 17, Federal Income Tax for Individuals: https://www.irs.gov/publications/p17

Closing

Remember, when it comes to tax matters, it’s always best to seek professional advice. Whether you’re an individual, a corporation, or a nonprofit organization, we’re here to support you. We strongly advise confirming your tax obligations by speaking to a Tax advisor.

501(c)(3) Conflict of Interest Simplified

Launching and running a 501(c)(3) can be tough. Navigating a conflict of interest policy can be a huge part of that. Learn more about this rarely talked about aspect of running a 501(c)(3) with this 501(c)(3) Conflict of Interest Simplified guide from 501(c)(3) Center.

What is the purpose of the conflict-of-interest policy?

Charitable organizations are frequently subject to intense public scrutiny, especially where they appear to have inappropriately benefited their officers, directors, or trustees. The IRS, with its crucial oversight role concerning charitable organizations, is a key player in this. An essential part of this oversight is providing organizations with strategies to help avoid the appearance or actuality of private benefit to individuals in a position of substantial authority. The recommended conflict of interest policy is a strategy we encourage organizations to adopt to establish procedures that will offer protection against charges of impropriety involving officers, directors, or trustees.

A conflict of interest is a situation where an individual’s duty to advance the charitable goals of the organization clashes with their personal financial interests.

Conflict of Interest in Business Transaction

For example, a conflict of interest occurs when an officer, director, or trustee votes on a contract between the organization and a business owned by the officer, director, or trustee.

Conflict of Interest Establishing Compensation

The conflict-of-interest policy plays a crucial role in ensuring that when actual or potential conflicts of interest arise, the organization has a process in place. This process requires the affected individual to disclose all relevant facts to the governing body. Conflicts of interest often surface when officers, directors, or trustees are considered for compensation or benefits.

Establishes Procedures and Protocol for Handling Conflicts of Interest

A conflict-of-interest policy also proactively establishes procedures for when and which individuals to excuse during the voting process when voting on such matters

Apart from any appearance of impropriety, organizations will lose their tax-exempt status unless they operate in a manner consistent with their charitable purposes. Serving private interests more than insubstantially is inconsistent with accomplishing philanthropic purposes, underscoring the urgency and importance of having a robust conflict of interest policy in place.

IRS Reference Page:
Form 1023: Purpose of Conflict-of-Interest Policy. https://www.irs.gov/charities-non-profits/form-1023-purpose-of-conflict-of-interest-policy

What Nonprofits Need to Know

Tax Form 990, a crucial tax form that all tax-exempt nonprofits in the United States must file annually with the Internal Revenue Service (IRS), plays a significant role in maintaining transparency. It helps the IRS ensure compliance with tax obligations and provides a clear financial picture to the public, including donors, partners, and other stakeholders. However, it’s important to note that there are different types of 990 forms, and the one you file depends on your organization’s size and type.

In this blog, we’ll discuss the four primary versions of Form 990: 990-N, 990-EZ, 990-PF, and 990-T, including what each form entails and when your organization must file it.

What is Form 990?

Form 990 is an annual tax form that nonprofits must submit to the IRS. It provides crucial information on the organization’s mission, programs, and finances. It helps the IRS and the public evaluate whether the nonprofit complies with its tax-exempt purpose. Filing the correct version of the 990 form is critical, as failing to file can result in penalties and even the loss of tax-exempt status, which can significantly impact the organization’s operations and reputation.

1. Form 990-N (e-Postcard)

Form 990-N, often referred to as the “e-Postcard,” is the simplest version of the 990 forms. It’s designed for smaller nonprofits with $50,000 or less gross receipts, offering a quick and easy electronic filing process. This ensures that even the most minor organizations can maintain transparency about their operations without feeling overwhelmed by the filing process.

What Does It Include?

The 990-N requires minimal information, including:

• The organization’s legal name and mailing address
• Employer Identification Number (EIN)
• Tax year
• A confirmation that the organization’s gross receipts are $50,000 or less

Example: 

A local animal rescue nonprofit that raises less than $50,000 annually through small donations and local fundraising events would file Form 990-N. The organization has limited assets and minimal financial complexity, so the e-Postcard provides a simple way to stay compliant with the IRS without needing to file detailed financial statements.

2. Form 990-EZ

Form 990-EZ is for medium-sized nonprofits with gross receipts less than $200,000 and total assets less than $500,000. It requires more information than the 990-N but is less complex than the complete Form 990. This version is ideal for growing organizations that don’t yet meet the filing requirements for the full Form 990.

What Does It Include?

The 990-EZ includes more detailed financial and operational information, such as:

• Revenue and expenses
• Assets and liabilities
• Program service accomplishments
• Information on board members and key employees

Example:

A youth development nonprofit that brings in $150,000 annually through grants and program fees and has assets of $400,000 would need to file a 990-EZ. The organization’s financial operations are more extensive than those of smaller nonprofits, and a 990-EZ allows the IRS and the public to get a clear picture of how the organization uses its funds.

3.Form 990 Standard (aka long):

The standard Form 990 is for larger organizations with gross receipts exceeding $200,000or total assets at the end of the tax year greater than $500,000. It provides an in-depth view of the organization’s finances, governance, and activities. Organizations who are eligible to file a 990N or 990EZ may still file a 990 Standard if they are planning to apply for grants which require copies of 990 Standard filings.

What Does It Include?

The 990 Standard more detailed financial and operational information, such as:

• Revenue and expenses
• Assets and liabilities
• Program service accomplishments
• Information on board members and key employees
• The IRS may also require you to attach additional documents through Schedules. There are 16 Schedules available on form 990.

4. Form 990-PF

Form 990-PF is specifically for private foundations, regardless of their financial size or revenue. Private foundations differ from public charities in that they typically have a single primary source of funding (such as an individual, family, or corporation) and are often subject to different tax rules.

What Does It Include?

The 990-PF discloses financial details about the foundation’s investments and grants, and it includes:

• Detailed financial statements
• A list of grants and contributions made during the year
• Information on officers, directors, trustees, and key employees
• Calculations of net investment income and minimum distributions required by law

Example:

A family foundation that provides grants to education and environmental causes, funded primarily by a single donor, would need to file a 990-PF. Even if the foundation has modest assets, this form ensures that the IRS tracks its grantmaking activities and investment income to ensure compliance with foundation regulations.

5. Form 990-T

The Form 990-T requirement applies to nonprofits that generate unrelated business income (UBI) of $1,000 or more. Even though nonprofits are tax-exempt, they must pay taxes on income generated from activities unrelated to their tax-exempt purpose. These are considered “unrelated business activities,” and their income is taxable.

What Does It Include?

A 990-T includes sections for reporting:

• Gross income from unrelated business activities
• Expenses associated with generating that income
• Calculation of any taxes owed

Example:

A nonprofit hospital runs a parking lot open to the general public for a fee. Since the parking lot generates income that is not directly related to the hospital’s mission, the income would be classified as unrelated business income, requiring the hospital to file Form 990-T to report and pay taxes on the revenue.

Conclusion

Understanding the different types of Form 990 is crucial for nonprofits to maintain compliance and protect their tax-exempt status. Each form—the 990-N for small organizations, the 990-EZ for mid-sized nonprofits, the 990-PF for private foundations, or the 990-T for unrelated business income—serves a specific purpose in ensuring transparency and accountability.

Need help with your nonprofit’s Form 990 filing?

At 501(c)(3) Center, we specialize in providing expert guidance to nonprofits of all sizes navigating IRS reportingrequirements. Whether you’re unsure which form to file or need assistance to avoid penalties, we’re here to provide the support and expertise you need to confidently navigate the filing process.

What is IRS Filing 990-N?

990-N Detailed Overview

While nonprofits with 501(c)(3) tax exemption status might not pay federal taxes, they still must file their nonprofit’s IRS Tax Form 990 or Form 990-N for nonprofit organizations. Filing this form ensures that nonprofits conduct their charity business in a way that complies with their public nonprofit responsibilities. In addition, filing the IRS 990 Form provides the IRS with an overview of your activities throughout the last fiscal year. Filing IRS Form 990 also provides transparency to current and potential donors, as IRS Form 990 helps donors understand how your nonprofit Organization operates and is managed.

There are five versions of the IRS Nonprofit Form 990. The 990-N allows organizations with less than $50,000 in gross revenue to qualify to file Form 990-N. The IRS sometimes refers to 990-N as the e-Postcard. The 990-N is the most basic report for organizations, but there are better choices than the 990-N.

Only tax-exempt organizations with less than $50,000/year in annual revenue receipts can submit Form 990-N. However, there are a few exceptions for newer organizations. It’s essential to ensure your Organization meets these criteria before filing the 990-N.

Your Organization can file the 990-N if it:

1. It has existed for one (1) year or less and is reporting less than $75,000 in revenue.
2. It has existed for 1-3 years and is reporting less than $60,000 in revenue.
3. Exists for 3+ years and has reported less than an average of $50,000 in annual revenue over the most recent three (3) years (including the current year)

What information is needed to complete 990-N?

The information included on Form 990-N includes:

1. The legal name of the Organization
2. Provide all registered trade names, DBA, or Doing Business As.
3. The current Mailing address of the Organization
4. Name and address of the principal officer
5. Whether or not the Organization is still operating
6. Federal Employee ID Number (EIN)
7. Attestation from the authorized officer that the Organization meets the requirements (Less than $50,000 or less in gross receipts.
8. If applicable, provide a statement of whether the Organization has been dissolved/terminated or is in the process.

Why Filing the 990-N is Crucial

1. Why Filing the 990-N is Crucial: maintaining Tax-Exempt Status Failure to file the 990-N for three consecutive years can automatically revoke a nonprofit’s tax-exempt status. Losing the 501(c)(3) designation can devastate small organizations that rely on donations and grants. This underscores the critical importance of timely and accurate filing. Transparency and Accountability: Filing the 990-N enhances transparency and accountability, demonstrating to donors, funders, and the public that the Organization is adhering to regulations and, therefore, building trust and support from the community.
2. Avoiding Penalties: Nonprofits that miss the filing deadline may face penalties and fees, which can strain their limited resources. Timely filing helps organizations avoid these extra costs.
3. Access to Funding Opportunities: Many grant-making organizations require proof of compliance with IRS filing requirements. Having an up to date 990-N is often a prerequisite for accessing valuable funding opportunities.
4. Improving Organizational Management: Preparing to file the 990-N encourages nonprofits to maintain accurate and transparent financial records, ultimately strengthening their financial management.

Can we file the 990-N ourselves?

Yes, the 990-N is straightforward to complete on your own. We understand that the process may seem daunting, but we assure you it’s more straightforward than it appears. However, we have shared a few reasons to consider outsourcing to a tax or accounting professional, such as a 501(c)(3) Center.

1. The first step is registering and creating a login with the IRS, which requires an ID verification process. Once you have your login credentials, you can proceed with filing.
2. It’s reasonable that a nonprofit could handle filing Form 990-N on its own. However, if you have a third-party tax professional, you can enjoy the peace of mind of knowing the filing is complete.
3. The cost to outsource is remarkably low, generally between $100 and $300. This affordability ensures that even nonprofits with limited resources can benefit from professional assistance, providing a sense of financial security. 501(c)(3) Center is $200.
4. Ensure it’s done correctly and not put your tax-exempt status at risk.
5. We see a lot of board turnover, and the 990-N fails to get filed. If this happens for three consecutive years, it often results in losing 501(C)(3) status. We want to make sure you’re aware of this risk so you can take the necessary precautions.

If the process is straightforward, why should I hire a 501(c)(3) Center?

Filing with 501(c)(3) Center provides peace of mind. Here are some additional reasons to partner with 501(c)(3) Center to file your 990-N.

• The professional team oversees the process to ensure completeness.
• Our technology will file directly with the IRS. You don’t need to sign up; review the verification process and monitor with the IRS.
• Our team reviews your other compliance needs and brings any deficiency to your attention.
• Confirm filing receipt with the IRS.
• It’s a small price and lets you focus on other things. We will have it done quickly and efficiently.

Summary

Filing the 990-N is not just a regulatory obligation for small nonprofit organizations but a vital component of sustainable operation and growth. By staying compliant, these organizations can safeguard their tax-exempt status, increase transparency, avoid penalties, access funding opportunities, and enhance their financial management practices. Small nonprofits must treat this obligation with the seriousness it deserves to ensure their mission continues to thrive. If you need assistance of any kind, don’t hesitate to contact 501(c)(3) Center for all your nonprofit needs.

Check the status of your 501(c)(3) application with ease with this guide from 501(c)(3) Center!

The IRS currently offers two ways to apply for the 501(c)(3) Tax Exemption: the standard 1023 form or the 1023EZ online form. The 1023 form is more comprehensive and suitable for larger organizations, while the 1023EZ form is simpler and quicker, designed for smaller organizations with less complex financial structures. Each application has vastly different timelines.

1023EZ Application:  The 1023EZ is a more straightforward, less complicated form that takes 2-4 months for the IRS to review and approve. It’s designed for smaller organizations with less complex financial structures. Filing a 1023 EZ application has a much quicker review process for qualified organizations.  Not all organizations can qualify for the 1023-EZ. In our experience, it’s about a 50/50 ratio of who qualifies.

1023 Standard (long): The 1023 standard, also known as the long form, takes a predictable 6-9 months for the IRS to review and approve. However, this timeline can be longer based on macro events, such as a government shutdown or events such as COVID-19, which impacted the day-to-day operations of the IRS. Understanding the difference in the form timelines will help you set proper expectations as you wait for the confirmation of your 501c()(3) status.

How to Check the status of your 501(c)(3) Tax-Exempt Application!

The IRS receives more than 95,000 applications for tax-exempt status each year. If you’ve already applied and submitted your 1023EZ or 1023 standard application, we’ve conveniently provided the following guidelines for when you can expect to hear from the IRS.

There is no need to call.Check to see if the IRS has begun processing your application: Click here to check to see if the IRS has started working on your 1023 tax-exempt application!

IRS Organizational Look-Up Tool

Once Approved, how can I find my organization on the IRS website?

You can search existing 501(C) organization on the IRS website here: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search

What else can I find using the IRS look-up feature?

You can also search for information about an organization’s tax-exempt status and filings, including:

1. Check out current status
2. Form 990 Series Returns
3. Form 990-N (e-Postcard)
4. 78 Data
5. Automatic Revocation of Exemption List
6. Determination Letters

If you hired the 501(c)(3) Center to file your 1023EZ application and have additional questions, please email us at [email protected]. We are here to provide the support you need and will be happy to answer them.