What Nonprofits Need to Know
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.