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Note: In addition to our regular blog postings, we occasionally post observations and updates about the nonprofit sector by Put Barber, Editor of the Nonprofit FAQ. Last week, Put blogged about recent media coverage of declining ethical standards at some charities and organizations. This week he sheds light on everyone's favorite topic: tax forms.
US nonprofits have to file a report known as Form 990 with the Internal Revenue Service each year. The report is due five months and 15 days after the end of the organization’s fiscal year. Since lots of nonprofits have fiscal years that end on December 31, those organizations will need to file with the IRS this year by Thursday, May 15.
Remember, all 990s are public documents and can be reviewed by anyone. Preparing a complete, accurate and easy-to-read 990 is a simple step in the direction of assuring the community, donors and grant-makers that the organization takes its management responsibilities seriously. Increasingly, organizations are seeing their 990 as an element in their communications planning – it’s technical for sure, and hardly the raw material for a run-away best-seller or an SRO movie, but it’s something anyone can look for online to learn about the organization and its work. That alone makes it worth a second glance before filing, just to be sure it is telling the organization’s story in the most effective way.
There’s been much discussion of change in the Form 990 recently, so a recap of where things stand now may be useful.
- The Form 990 to use for reporting to the IRS during 2008 is available online at http://www.irs.gov/pub/irs-pdf/f990.pdf. It is not much changed from last year.
- Organizations with more than $25,000 but less than $100,000 in gross receipts may use Form 990-EZ, which is somewhat simpler to prepare. Form 990-EZ is available online at http://www.irs.gov/pub/irs-pdf/f990ez.pdf.
- NEW: Organizations with less than $25,000 in gross receipts now must file a simple annual report with the IRS each year. Called the 990-N, this form is available only in an electronic format for e-filing. Read more about the requirements and procedures for Form 990-N at http://www.irs.gov/charities/article/0,,id=169250,00.html.
- CHANGE: Charitable nonprofits (also known as 501(c)(3) organizations) with more than $1,000 in business income that is not related to their exempt purposes must also file Form 990-T. In the past, the Form 990-T was not subject to public disclosure. Starting in August 2006, the Form 990-T is a public document and organizations must provide a copy to anyone who requests one. Copies can also be requested from the IRS; it recently published guidance for how to make such a request. See http://www.irs.gov/pub/irs-drop/a-08-21.pdf.
- BIG CHANGES COMING: The Form 990 and the Form 990-EZ are changing. They have both been redesigned for use in 2009 and future years. There are more questions, more data is required, and both forms use a new structure with many schedules that focus on specific data from organizations that do different kinds of work. The redesigned form was published in December 2007. The IRS published draft instructions for the new form on April 7, with a comment period that runs until the first of June. An introduction to the draft Instructions is at http://www.irs.gov/charities/article/0,,id=181089,00.html.
You may want to look at the new instructions and send any comments you have to the IRS before June 1.
Here are some other things you should be aware of:
- Transition rules: Because the new forms are complicated and unfamiliar, the IRS is phasing in their use over several years. For the 2008 tax year (returns filed in 2009), organizations with gross receipts less than $1.0 million and total assets less than $2.5 million may file the Form 990-EZ. For the 2009 tax year (returns filed in 2010), organizations with gross receipts less than $500,000 and total assets less than $1.25 million may file the Form 990-EZ. The Form 990-EZ filing thresholds will be adjusted permanently to gross receipts less than $200,000 and total assets less than $500,000 beginning with 2010 tax years. There are also some further transition rules that apply to the use of particular schedules.
- Electronic filing: Filing your forms online with the IRS increases accuracy, reduces delays, and cuts costs. Congress is encouraging the IRS to bring more and more filing online – and nonprofits are no exception. The 990-N must be filed online; there is no equivalent form that can be printed out and mailed. Certain large organizations are already required to file their 990s online, and the threshold for this requirement is moved lower each year. Any organization is now invited to file online; many firms that prepare 990s use electronic filing programs already. Professionals that prepare 990s and individual organizations may also use the publicly available program at http://www.form990.org, a project of the National Center for Charitable Statistics at the Urban Institute. (There is a sliding scale fee for use of this system with organizations up to $100,000 in gross revenue given access without charge.)
With just over a month before the deadline, I hope you will take the time to make sure your Form 990 tells the story of your organization accurately and well. Good luck!
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