A Layman-Friendly Guide

Form 990 is the IRS's annual information return that most tax-exempt organizations must file to maintain their tax-exempt status. Think of it as a comprehensive report card that shows the IRS—and the public—how your nonprofit operates and spends its money.

The form collects detailed information about an organization's activities, finances, governance practices, and compliance with federal tax laws. Unlike a tax return where you calculate taxes owed, Form 990 is primarily an informational document designed to ensure transparency and accountability in the nonprofit sector. However, filing it correctly is critical: it's how the IRS monitors whether your organization continues to deserve tax-exempt status.

Form 990 is required for most organizations exempt under section 501(c) of the Internal Revenue Code, including charitable organizations, educational institutions, religious groups (with some exceptions), and social welfare organizations. Political organizations under section 527 and certain nonexempt charitable trusts must also file.

What the Form Is For

Form 990 is the IRS's annual information return that most tax-exempt organizations must file to maintain their tax-exempt status. Think of it as a comprehensive report card that shows the IRS—and the public—how your nonprofit operates and spends its money.

The form collects detailed information about an organization's activities, finances, governance practices, and compliance with federal tax laws. Unlike a tax return where you calculate taxes owed, Form 990 is primarily an informational document designed to ensure transparency and accountability in the nonprofit sector. However, filing it correctly is critical: it's how the IRS monitors whether your organization continues to deserve tax-exempt status.

Form 990 is required for most organizations exempt under section 501(c) of the Internal Revenue Code, including charitable organizations, educational institutions, religious groups (with some exceptions), and social welfare organizations. Political organizations under section 527 and certain nonexempt charitable trusts must also file.

When You’d Use This Form (Including Late and Amended Filings)

Regular Annual Filing

Form 990 for the 2012 tax year must be filed by the 15th day of the 5th month after your organization's accounting period ends. For calendar-year filers, that means May 15, 2013. If your fiscal year differs, the deadline is 5 months after your fiscal year ends.

Extension Requests

If you need more time, you can request an automatic 3-month extension using Form 8868. If that's still not enough, you can apply for an additional 3-month extension (not automatic), but you'll need to demonstrate reasonable cause for needing the extra time.

Amended Returns

You can file an amended Form 990 at any time if you need to correct or add information from a previously filed return. To do this, file a complete new return for the same period, check the "Amended return" box in Item B of the form's heading, and use Schedule O to explain which sections were changed and why. Remember: you must provide all the information required by the form, not just the corrections.

Final Returns

If your organization dissolves, merges, or terminates, check the "Terminated" box in Item B and complete Schedule N along with the rest of the form.

Late Filings

If you miss the deadline (even with extensions), attach a separate statement explaining why the return is late. The IRS may waive penalties if you demonstrate reasonable cause, but don't count on it—penalties can be steep.

Key Rules and Requirements for 2012

Who Must File

You must file Form 990 if your organization:

• Has gross receipts of $200,000 or more, OR
• Has total assets of $500,000 or more at year-end

Smaller organizations can choose to file the shorter Form 990-EZ or even just submit Form 990-N (the electronic postcard) if gross receipts are normally $50,000 or less.

Mandatory Electronic Filing

If your organization files at least 250 returns of any type during the calendar year and has total assets of $10 million or more at year-end, you must file electronically. Filing a paper return when e-filing is required means the IRS considers your return not filed—even if you submitted it.

Public Disclosure

Almost everything on your Form 990—including all schedules and attachments except certain donor information on Schedule B—becomes public record. The IRS and your organization must make the return available for public inspection for three years from the filing date (or due date, whichever is later). This means donors, journalists, competitors, and curious community members can request and view your return.

No Social Security Numbers

Because Form 990 is publicly disclosed, never include social security numbers anywhere on the form or its schedules. By law, the IRS cannot remove this information before making the form public.

Accounting Methods

You should generally use the same accounting method (cash or accrual) that you use for your regular books and records. However, many states require accrual accounting for Form 990, and you can file an accrual-based return with the IRS even if your books use cash accounting—as long as it doesn't conflict with IRS instructions.

Related Organizations

You must report information about related organizations, including subsidiaries, affiliated entities, and organizations sharing common control or significant relationships.

Step-by-Step (High Level)

While Form 990 has 12 main parts plus numerous potential schedules, here's a practical sequence recommended by the IRS:

1. Gather Your Information: Collect financial statements, payroll records, governance documents, and information about all programs and activities for the tax year.
2. Complete the Heading: Fill in basic information (Items A–M on page 1), including your organization's name, address, EIN, tax year, and check appropriate boxes (initial return, amended return, final return, etc.).
3. Identify Your Relationships: Determine which organizations are "related" to yours under IRS definitions, as you'll need to report them in Schedule R.
4. List Key People: Identify your officers, directors, trustees, key employees, and five highest-compensated employees who must be reported in Part VII, Section A.
5. Complete Financial Sections First: Fill out Parts VIII (Revenue), IX (Expenses), and X (Balance Sheet). These form the financial foundation of your return.
6. Work Through Remaining Parts: Complete Parts III (Program Service Accomplishments), V (Tax Compliance), VII (Compensation), XI (Reconciliation of Net Assets), and XII (Financial Statements).
7. Address Governance: Complete Part VI, which asks detailed questions about your board structure, policies, and disclosure practices.
8. Determine Required Schedules: Part IV is a checklist that helps you identify which of the 16 schedules (A through R) you must complete based on your "Yes" answers.
9. Complete Schedules: Fill out Schedule O (required for all filers) and any other applicable schedules. Schedule O is where you provide narrative explanations and supplemental information.
10. Final Review and Signature: Complete Part I (Summary), verify everything is accurate and complete, and have an authorized officer sign Part II (Signature Block).

Common Mistakes and How to Avoid Them

Filing Incomplete Returns

The most common error is leaving questions blank, skipping required schedules, or failing to attach necessary documentation. The IRS can impose penalties for incomplete returns just as it does for late returns. Solution: Answer every applicable question—enter zero if appropriate, and follow all skip-pattern instructions carefully.

Missing the Deadline

Many organizations miss the May 15 deadline or fail to request extensions. Solution: Mark your calendar for the deadline date. If you need more time, file Form 8868 before the original due date to get an automatic 3-month extension.

Incorrect Gross Receipts Calculation

Organizations sometimes confuse "gross receipts" with "net income" or fail to include all revenue sources. Gross receipts are total amounts received from all sources before subtracting expenses. Solution: Review Appendix B of the instructions carefully and include all revenue: contributions, program service revenue, investment income, and other receipts.

Reporting Only Net Contributions

Some organizations report contributions after subtracting fundraising expenses, but the IRS wants gross figures. Solution: Report the full amount of contributions received in Part VIII, then report fundraising expenses separately in Part IX.

Inadequate Schedule O Explanations

When the form asks you to "explain in Schedule O," providing vague or incomplete narratives can trigger IRS inquiries. Solution: Be specific, thorough, and clear in all Schedule O explanations. Reference the part and line number you're explaining.

Compensation Reporting Errors

Underreporting or omitting compensation for key employees, officers, or directors is a frequent problem that can trigger audits. Solution: Include all forms of compensation: salaries, bonuses, benefits, retirement contributions, and expense reimbursements. Review W-2s, 1099s, and payroll records carefully.

Three-Year Filing Failure

Failing to file for three consecutive years results in automatic revocation of tax-exempt status. Solution: Set up reminders, assign responsibility to specific staff or board members, and consider professional assistance if your organization struggles with compliance.

What Happens After You File

IRS Processing

After you file, the IRS processes your return and adds it to their database. While they don't issue formal acknowledgments like "Your return was accepted," you can verify receipt through your e-filing confirmation (if filed electronically) or delivery confirmation (if mailed).

Public Disclosure Begins

Within weeks of filing, your Form 990 becomes publicly available through the IRS. Anyone can request a copy directly from your organization or from the IRS under section 6104 of the Internal Revenue Code.

Your Disclosure Obligations

Federal law requires your organization to provide copies of its three most recent Form 990s to anyone who requests them. For in-person requests, you must provide copies immediately. For written requests, you have 30 days to respond. You may charge reasonable copying and postage fees.

State Filing Requirements

Many states accept Form 990 to satisfy state charitable registration and reporting requirements. However, some states require additional forms or specific modifications. Check your state attorney general's office or charity registration bureau for specific requirements. You may need to send copies of amended returns to states where you initially filed.

Maintain Records

Keep copies of your filed Form 990 and all supporting documentation for at least three years from the filing date (or due date, whichever is later). Records supporting property basis should be kept indefinitely. These records must be available if the IRS audits your return or if someone requests public inspection.

Monitoring for Questions

The IRS may send correspondence if they have questions about information reported on your return. Respond promptly and thoroughly to any IRS inquiries. Ignoring IRS letters can lead to penalties or jeopardize your tax-exempt status.

Annual Cycle Continues

Filing Form 990 doesn't end your obligations—it's an annual requirement. Begin preparing for next year's return by maintaining organized records throughout the year.

FAQs

Q: What's the penalty if we file late?

A: Penalties are $20 per day for organizations with gross receipts under $1 million (maximum $10,000 or 5% of gross receipts, whichever is less). For larger organizations with gross receipts over $1 million, penalties jump to $100 per day (maximum $50,000). If you fail to file for three consecutive years, the IRS automatically revokes your tax-exempt status.

Q: Can we file Form 990-EZ or Form 990-N instead?

A: It depends on your size and type. If your gross receipts are under $200,000 and total assets are under $500,000, you can use Form 990-EZ. If gross receipts are normally $50,000 or less, you can submit Form 990-N (the e-Postcard). However, sponsoring organizations of donor advised funds and certain controlling organizations must file the full Form 990 regardless of size.

Q: What if we're a church—do we still file?

A: Churches, integrated auxiliaries of churches, and certain other religious organizations are generally exempt from filing Form 990. However, if your church operates substantial unrelated business activities or receives requests for public accountability, you may choose to file voluntarily. Section 509(a)(3) supporting organizations must file even if they support religious organizations.

Q: How do we handle our audited financial statements?

A: If your organization obtains audited financial statements, you must complete Schedule D, Parts XI and XII to reconcile differences between your audited statements and what's reported on Form 990. Hospital organizations must also attach a copy of their most recent audited financial statements to the form. Other organizations don't need to attach audited financials, but should keep them with their records.

Q: What if we made a mistake on a filed return?

A: File an amended return anytime you discover errors or omissions. Use the same version of Form 990 as the original return, check the "Amended return" box, complete the entire form (not just corrections), and explain the changes in Schedule O. Amended returns are also subject to the three-year public inspection requirement.

Q: What counts as "gross receipts" for determining filing requirements?

A: Gross receipts include contributions, program service revenue, membership dues, investment income, gain from sale of assets, fundraising gross receipts, special event gross receipts, gross profit from inventory sales, and all other revenue—before subtracting any expenses. See Appendix B of the IRS instructions for detailed calculation methods.

Q: Can the public really see our entire Form 990?

A: Yes, with very limited exceptions. The entire return, including all schedules except parts of Schedule B (contributor information for most organizations), is publicly available. This includes information about your programs, governance, compensation, transactions with board members, and detailed finances. The IRS and your organization itself must provide copies upon request.

For More Information

For Complete Instructions and Forms: Visit IRS.gov or download the 2012 Form 990 Instructions (PDF).

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