Form 990 is an informational report filed annually with the IRS by organizations exempt from federal income taxes. The 990 serves as a transparency, accountability, and compliance tool for tax-exempt organizations in accordance with IRS and state charity regulations.
The form is more than just a compliance requirement, however—it conveys information about a nonprofit’s mission, finances, and governance to donors, regulators, and the public. Anyone with internet access can view your organization’s Form 990 on the IRS website or request to see it, as it is subject to public disclosure. Whether applying for grants or preparing for audits, the 990 helps maintain accountability: board members use them for oversight, supporters use them to seek assurance that their contributions are impactful, and funders use them to assess worthiness. Filing accurately and on time is essential for maintaining tax-exempt status and building public trust.
Key Elements in the Form 990 that Help Tell Your Organization’s Story
Statement of Program Service Accomplishments
Part III of Form 990 emphasizes your organization’s mission. It requires a comprehensive description of your primary programs and the measurable outcomes achieved throughout the year. This section provides an opportunity to showcase the effectiveness of your initiatives and foster trust among funders, volunteers, and partners.
Financial Reporting
Statement of Revenue
Part VIII of Form 990 categorizes income sources, such as contributions, grants, program service revenue, and investment income. This breakdown allows stakeholders to assess the nonprofit’s financial sustainability and funding diversity.
Statement of Functional Expenses
Part IX of Form 990 reports the functional categorization of expenses as follows:
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- Program services: Costs directly tied to carrying out your mission such as program staff salaries and supplies.
- Management and general: Administrative costs such as board meetings, accounting, patient accounting and billing, human resources, legal services, office operations, and executive salaries.
- Fundraising: Costs associated with soliciting grants and contributions such as campaigns, donor events, and grant writing.
Expenses within each functional category are divided by type, such as salaries, rent, and office supplies.
Expenses by function show resource efficiency and help stakeholders see if mission-related activities are prioritized over administrative costs. Funders often examine the program services versus overhead spending when deciding on grants.
Balance Sheet (Statement of Financial Position)
Part X of Form 990 provides a snapshot of the organization’s financial position at year-end. The balance sheet comprises three sections as follows:
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- Assets (own): Cash, receivables, investments, property, and other resources owned.
- Liabilities (owes): Debts, loans, accounts payable, and other financial obligations owed.
- Net assets: The assets left after deducting the liabilities, which are then divided into categories like with and without donor restrictions.
This section provides an assessment of your nonprofit’s financial stability, growth prospects, or challenges in meeting its obligations. A healthy balance sheet enhances credibility with potential donors and assures regulators of the financial integrity of your organization.
Governance and Management
Part VI of Form 990 provides details on your organization’s governance practices. These practices include board size, structure, and management policies. While the governance policies listed aren’t mandatory, well-governed charities are more likely to comply with tax laws, protect assets, and serve their charitable missions. This section reflects the organization’s commitment to transparency and accountability (or lack thereof).
Schedule A: Public Charity Status
Part I of Schedule A (attachment to Form 990) specifies the IRS Section 501(c)(3) classification under which your organization is tax-exempt. These classifications include organizations receiving substantial support from governmental units or the public, educational institutions, hospitals, and certain supporting organizations. Each classification has unique requirements that must be met to maintain public charity status. The rest of Schedule A confirms adherence to the necessary requirements for this status.
Due Date
Form 990 is due on the fifteenth day of the fifth month after the end of your tax year. For example, calendar year filers with a December 31 year-end would have a due date of May 15. You can request a six-month extension if more time is needed.
Closing
Completing the Form 990 is not merely an administrative task; it is an opportunity to enhance your nonprofit’s transparency, credibility, and long-term viability. If you have questions or need assistance in telling your organization’s unique story, contact DZA today.
