By now, your nonprofit organization is likely preparing for tax time. Because inaccurate tax reporting can be so costly to your organization at both a financial level and to the future of the nonprofit, it is important to be informed and to be using a nonprofit accounting software to help keep you up-to-date on organizational financial happenings. Over the years, RBP Methods has seen that many nonprofits and nonprofit boards are not as aware as they should be of what data and information is expected to be reported and needs to be reported on Form 990 returns. There is a risk of not being aware of the penalties that are possible to incur if these Form 990 forms are filed late, are inaccurate, or are left incomplete without proper understanding of this information.
One way to be informed is to be using and accessing reports from a nonprofit accounting software. These systems are designed to help keep information orderly and accessible, and the software’s systems help you to not have to face tax season without the data you need. To learn more about how fund accounting software can help make tax compliance easy, visit here.
As a member of the board of directors, a trustee, or a staff member of a nonprofit, it is your duty and responsibility to review the Form 990 sufficiently to help protect both yourself and your organization from penalties. Although not an IRS requirement, it is certainly a best practice and strongly encouraged that boards review Form 990 information. By submitting proper information in a timely manner, you offer three forms of protection. You protect your organization from losing its exempt status. You also protect the organization from incurring potential financial penalties. Finally, you protect board members from the possibility of owing money personally from personal penalties.
RBP Methods understands that these forms are confusing, complicated, and overwhelming. Not only that, but it is difficult for those of you working at nonprofit organizations, who should be focused on the important work and mission of the organization, to truly understand them and what is expected on them. The intricacies necessitate trained professionals who are well versed in the forms and understand the legalities and complexities well. As you can see, inaccuracies can be costly to your nonprofit organization’s future, but you don’t have to worry about those if you solicit the help of a professional tax advisor. Consider getting professional assistance with tax forms by a Certified Public Accountant or a tax professional in order to fully protect yourself and your organization.
Now that you understand that Form 990s and other tax forms are often misunderstood or not understood by boards and nonprofit staff members, that there are risks to inaccurately filing Form 990s but also ways to protect yourself, and that a professional tax advisor or Certified Public Accountant (CPA) is likely a necessity in helping taxes get filed properly, let’s take a quick look at a general overview of Form 990 including what it is, when it needs to be filed, and what is included on the form.
What is the Form 990?
The IRS Form 990, officially referred to as the “Return of Organization Exempt from Income Tax,” is the tax document that tax-exempt, nonprofit organizations file each year with the IRS. The 990 allows the IRS and the public to evaluate nonprofits and how they operate.
The Form 990 requires disclosure of potential conflicts of interest, compensation of board members and staff, and other details having to do with financial accountability and avoidance of fraud.
When do you file the Form 990?
Your filing depends on your fiscal year end date. You are required to file by the 15th day of the 5th month after your fiscal year period ends.
What information is required on the Form 990?
Besides general information, the form includes a Statement of Program Service Accomplishments, a Checklist of Required Schedules, Statements regarding other IRS Filings and Tax Compliance, Governance, Management, and Disclosure information, Compensation figures, a Statement of Revenue, a Statement of Functional Expenses, a Balance sheet, Reconciliation of Net Assets, Financial Statements and Reporting.
Next week, we will take a closer look at what nonprofit key constituents truly need to understand and know about Form 990 information that is filed so they can differentiate that from what they can leave to the professionals. All of these filings can be made easy by having the proper fund accounting software in place to keep your organization’s important financial information in order. Contact us here at RBP Methods to learn more about accounting software options that will make tax time and your daily endeavors easier at your nonprofit.