Form 990 Overview

Posted on Wednesday, September 15, 2021

Nonprofit organizations, with a few exceptions, are required to annually file Form 990 with the IRS. One of the basic responsibilities of a board member is the review of this form. As a board member, are you familiar with the form?

First, there are a few different forms included in the 990 series. The form that your organization is required to file depends on your gross revenue and total assets.

Form 990-N, Annual Electronic Filing Requirement for Small Exempt Organizations (e-Postcard)
- Gross receipts are normally $50,000 or less
Form 990-EZ, Short Form Return of Organization Exempt From Income Tax
- Gross receipts of less than $200,000 and total assets of less than $500,000 at the end of the tax year
Form 990, Return of Organization Exempt From Income Tax
- Gross receipts of $200,000 or more or total assets of $500,000 or more
Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation
- Filed by private foundations

There are some exceptions where certain nonprofits must file Form 990 instead of 990-N or 990-EZ even if their gross receipts are less than $200,000 and total assets are less than $500,000.

Form 990 is the most common form filed. It consists of a 12-page core form and 16 supporting schedules. The core form must be completed by all organizations but most will not need to complete all of the schedules. The organization’s activities and type determine which schedules need to be completed.

The core form consists of the following parts.

Part I – Summary

This is a snapshot of the organization’s key financial, management, and operational data. The very first question asks to describe the organization’s mission or most significant activities. It is important to answer this question accurately and effectively. This is the first opportunity that you have to tell the reader about your organization so you will want to catch their attention. Revenue and expenses are also displayed in a two-year format (prior year and current year).

Part II – Signature Block

The Form must be signed by the current president, vice president, treasurer, assistant treasurer, chief accounting officer, or other corporate officer who is authorized to sign as of the date the return is filed. The individual signing the Form may not have been an officer during the tax year.

Part III – Statement of Program Service Accomplishments

Asks for a description of the mission, program service accomplishments and any changes in program services. The mission should have been adopted by the governing body and should be reviewed occasionally to ensure there is no mission drift. When reporting your program service accomplishments, make sure that you describe how you are fulfilling your mission. Be as descriptive as possible and show impact versus results. This is your opportunity to brag on what the organization has accomplished during the year.

Part IV – Checklists of Required Schedules

Includes 38 yes or no questions where an affirmative answer will require the organization to complete one of the 16 additional schedules. Be sure to compare the current year’s answers to the prior year’s answers to make sure you aren’t missing anything.

Part V – Statements Regarding Other IRS Filings and Tax Compliance

Includes 16 questions on tax compliance that is intended to alert the organization to other potential federal tax compliance matters and obligations.

Part VI – Governance, Management, and Disclosure

This IRS refers to this part as its “crown jewel.” The view of the IRS is that good governance and accountability practices provide safeguards that the organization’s assets will be used consistently for its exempt purpose. All organizations are required to answer each question. The policies asked about are not required by the Internal Revenue Code; however, a “no” answer may paint a less than ideal picture of the organization. It is also good to have these policies in place as they are considered best practices. If you do not currently have these policies in place, it may be good to put these policies in writing prior to the end of the year.

Part VII – Compensation

Discloses compensation and benefits of the organization’s directors, trustees, officers, key employees and highest compensated employees. It is important that the correct individuals are listed as these are the people that are responsible for the organization if something happened. Also make sure that your board listing matches your bylaws as far as the number and officer positions.

Part VIII – Statement of Revenue

Revenue sources are reported into one of three sources: (1) contributions, gifts, grants, and other similar amounts; (2) program service revenue; and (3) other revenue. This part not only requires to revenue by classification, but also to identify the nature of the revenue in three different categories: (1) related or exempt function revenue; (2) unrelated business revenue, and (3) excluded or excepted revenue.

Part IX – Statement of Functional Expenses

Highlights how the organization spends its resources. The “how” the resources are spent is presented allocated across three functional areas: (1) program services; (2) management and general; and (3) fundraising.

Part X – Balance Sheet

Reports the organization’s assets, liabilities, and net assets. Unique to Form 990 presentation of the balance sheet is there are separate lines items to separately identify those transactions between the tax-exempt organization and its insiders, such as loans receivable and loans payable to current and former officers, directors, trustees, key employees, highest paid compensated employees, and disqualified persons.

Part XI – Reconciliation of Net Assets

Reconciles the net assets of the organization to amounts as reported on its balance sheet in Part X.

Part XII – Financial Statements and Reporting

Tells the IRS what method of accounting the entity uses; whether financial statements were compiled, reviewed, or audited; and whether the organization is required to have a “yellow book” audit completed.

You may also be required to complete one or more of the 16 schedules depending on your answers to the core form questions.

Schedule A, Public Charity Status and Public Support
Schedule B, Schedule of Contributors
Schedule C, Political Campaign and Lobbying Activities
Schedule D, Supplemental Financial Statements
Schedule E, Schools
Schedule F, Statement of Activities Outside the United States
Schedule G, Supplemental Information Regarding Fundraising or Gaming Activities
Schedule H, Hospitals
Schedule I, Grants and Other Assistance to Organizations, Governments and Individuals in the U.S.
Schedule J, Compensation Information
Schedule K, Supplemental Information on Tax-Exempt Bonds
Schedule L, Transactions with Interested Persons
Schedule M, Noncash Contributions
Schedule N, Liquidation, Termination, Dissolution, or Significant Disposition of Assets
Schedule O, Supplemental Information to Form 990 or 990-EZ
Schedule R, Related Organizations and Unrelated Partnerships

As a board member, you should be familiar with Form 990 and ensure that it is complete, accurate and filed timely.

Contributed by: Carrie Minnich, CPA, MAcct | Director | DWD CPAs & Advisors

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.