A Complete Guide for Tax-Exempt Organizations

Form 990 is the primary annual information return that most tax-exempt organizations must file with the Internal Revenue Service. Think of it as a comprehensive report card that shows the public and the IRS how your nonprofit organization operates, spends its money, and fulfills its tax-exempt mission.

The 2011 Form 990 is required for organizations exempt from income tax under Section 501(a) of the Internal Revenue Code—including charities under Section 501(c)(3), social welfare organizations, business leagues, and many other types of exempt organizations. The form serves multiple purposes: it helps the IRS monitor compliance with tax-exempt rules, provides transparency to donors and the public, and often satisfies state reporting requirements as well.

Unlike a tax return that calculates what you owe, Form 990 is an information return. It requires detailed disclosure about your organization's finances, governance practices, program activities, and compensation paid to officers and key employees. For the 2011 tax year, organizations with gross receipts of $200,000 or more, OR total assets of $500,000 or more at year-end, must file the full Form 990 rather than the shorter Form 990-EZ or the electronic postcard Form 990-N.

What the Form Is For

Form 990 is the primary annual information return that most tax-exempt organizations must file with the Internal Revenue Service. Think of it as a comprehensive report card that shows the public and the IRS how your nonprofit organization operates, spends its money, and fulfills its tax-exempt mission.

The 2011 Form 990 is required for organizations exempt from income tax under Section 501(a) of the Internal Revenue Code—including charities under Section 501(c)(3), social welfare organizations, business leagues, and many other types of exempt organizations. The form serves multiple purposes: it helps the IRS monitor compliance with tax-exempt rules, provides transparency to donors and the public, and often satisfies state reporting requirements as well.

Unlike a tax return that calculates what you owe, Form 990 is an information return. It requires detailed disclosure about your organization's finances, governance practices, program activities, and compensation paid to officers and key employees. For the 2011 tax year, organizations with gross receipts of $200,000 or more, OR total assets of $500,000 or more at year-end, must file the full Form 990 rather than the shorter Form 990-EZ or the electronic postcard Form 990-N.

When You’d Use Form 990 (Including Late or Amended Returns)

Regular Filing Deadline

Form 990 for the 2011 tax year is due by the 15th day of the 5th month after your organization's accounting period ends. For calendar-year organizations, this means May 15, 2012. If your organization uses a fiscal year (for example, July 1, 2011 to June 30, 2012), your deadline would be November 15, 2012.

Extensions

If you need more time, file Form 8868 to request an automatic 3-month extension. If that's still not enough, you can request an additional 3-month extension by filing Form 8868 again, but you'll need to demonstrate reasonable cause for needing the extra time. This gives you up to six additional months total.

Late Filing

If you miss the deadline without filing for an extension, you should still file as soon as possible and attach a separate statement explaining why the return is late. Filing late triggers automatic penalties (discussed in Section 5), but the consequences of not filing at all are far worse—organizations that fail to file for three consecutive years automatically lose their tax-exempt status.

Amended Returns

You can file an amended Form 990 at any time to correct or add information to a previously filed return. Use the same version of Form 990 that was used for the original year (in this case, the 2011 form), check the "Amended return" box in the heading, and include Schedule O explaining what was amended and why. Amended returns must be made available for public inspection for three years from either the filing date or the original due date, whichever is later. Many states require that you also send them a copy of any amended return if you originally filed with them to satisfy state reporting requirements.

Key Rules or Details for 2011

Who Must File

You must file Form 990 (not the shorter 990-EZ) if your organization is a sponsoring organization of donor-advised funds, OR if you're a controlling organization under Section 512(b)(13) that transferred funds with a controlled entity during the year. Supporting organizations under Section 509(a)(3) must also file even if their gross receipts are normally $50,000 or less, with only limited exceptions for certain religious or church-affiliated organizations.

Gross Receipts Threshold Increase

For 2011, the IRS raised the gross receipts threshold from $25,000 to $50,000. This means organizations with gross receipts normally at or below $50,000 can file the simple electronic Form 990-N instead of a full return, unless they're specifically required to file Form 990 or 990-EZ.

Electronic Filing Requirements

Certain large organizations must file Form 990 electronically. If your organization has $10 million or more in total assets and files at least 250 returns during the calendar year (including information returns, income tax returns, and employment tax returns), electronic filing is mandatory.

Signature Requirements

For 2011, the IRS clarified that paid preparers can sign original or amended returns using a rubber stamp, mechanical device, or computer software program. All paid preparers must also enter their Preparer Tax Identification Number (PTIN).

Schedule O Requirement

All organizations filing Form 990 must complete Schedule O (Supplemental Information), which provides additional explanations and narratives required throughout the form. This wasn't optional in 2011.

Foreign Activities Reporting

Organizations with foreign investments valued at $100,000 or more during the tax year must complete Schedule F, Part I. New clarifications in 2011 specified when organizations should complete Schedule F Parts II or III based on grants made outside the United States.

Step-by-Step (High Level)

Step 1: Determine Your Filing Requirement

Calculate your organization's gross receipts for the year and total assets at year-end. If gross receipts are $200,000 or more, OR total assets are $500,000 or more, you must file Form 990 (unless you qualify to file Form 990-EZ instead).

Step 2: Gather Your Financial Records

Collect your organization's books and records for the entire tax year, including revenue from all sources, all expenses categorized by function (program services, management, fundraising), and year-end balance sheet information. You'll also need compensation records for officers, directors, key employees, and your five highest-compensated employees earning over $100,000.

Step 3: Complete the Core Form

Start with the heading information (organization name, address, tax year, EIN), then work through Parts I through XII. The IRS recommends completing sections somewhat out of order: fill out Parts VIII (Revenue), IX (Expenses), and X (Balance Sheet) first, as this information feeds into other parts. Then complete the Summary (Part I) and other sections.

Step 4: Complete Part IV Checklist

Part IV walks you through a series of yes/no questions to determine which additional schedules you must file. Common schedules include Schedule A (required for all 501(c)(3) organizations to document public charity status), Schedule B (contributor information), Schedule D (supplemental financial information), and Schedule O (required for all filers).

Step 5: Prepare Required Schedules

Based on your answers in Part IV, complete all applicable schedules. Each schedule has its own separate instructions. For example, if you answered "Yes" to conducting activities outside the United States, you'll complete Schedule F.

Step 6: Review and Sign

Have an officer or director review the complete return. The return must be signed under penalties of perjury by an officer (president, vice president, treasurer, assistant treasurer, chief accounting officer, or other corporate officer such as tax officer) and dated. If a paid preparer assisted, they must also sign.

Step 7: File on Time

Mail paper returns to the IRS address specified in the instructions (generally Ogden, UT), or file electronically if required or if you choose to do so. Keep a complete copy for your records.

Common Mistakes and How to Avoid Them

Missing Schedule O

One of the most frequent errors on 2011 Form 990s is forgetting that Schedule O is mandatory for ALL filers. Schedule O provides the space for required explanations referenced throughout the form. Double-check that you've completed it and attached it to your return.

Incomplete Part VII Compensation Information

Many organizations struggle with properly reporting compensation for officers, directors, trustees, and key employees. Remember that reportable compensation includes the greater of Box 1 or Box 5 from Form W-2. Don't forget to report deferred compensation and other benefits in Column (F), including the annual increase or decrease in actuarial value of defined benefit plans.

Wrong Form Filed

Some organizations mistakenly file Form 990 when they should file Form 990-PF (for private foundations) or vice versa. Similarly, organizations sometimes file when they don't need to, or fail to file when required. Review the eligibility rules carefully. If you discover you filed the wrong form, file the correct form as soon as possible with an explanation.

Inconsistent Financial Information

Your Form 990 numbers should tie to your audited financial statements if you have them. Discrepancies raise red flags. If your accounting method differs from what's required on Form 990 (for example, you use cash basis but the form requires accrual), make sure to reconcile the differences and, if required, explain them on Schedule D.

Overlooking Related Organizations

The 2011 instructions emphasized reporting relationships with other organizations. Schedule R requires disclosure of related organizations, including parent-subsidiary relationships, supporting/supported relationships, and transactions with related organizations. Failing to identify and report these relationships is a common error.

Missing Public Support Test Calculations

Section 501(c)(3) public charities must complete the public support calculations in Schedule A, Part II or Part III, to demonstrate they continue to qualify as public charities rather than private foundations. Many organizations fail to complete these calculations correctly, which can jeopardize their public charity status.

Incorrect Revenue Classification

Don't mix up program service revenue (line 2) with contributions (line 1). Program service revenue is income earned from activities that accomplish your exempt purpose, while contributions are gifts with no expectation of goods or services in return. Government payments for services (like Medicare/Medicaid) should generally be reported as program service revenue, not contributions.

To Avoid These Mistakes

Use the IRS instructions thoroughly, consider using tax-exempt organization software, have your return reviewed by someone with Form 990 expertise, and maintain organized books throughout the year so you're not scrambling at filing time.

What Happens After You File

Public Disclosure

Once filed, your Form 990 becomes a public document. The IRS posts Form 990s online and makes them available to the public. Your organization must also make copies available to anyone who requests them, either in person at your principal office during regular business hours or by mail. You can charge reasonable copying and mailing fees. This transparency is a cornerstone of nonprofit accountability—donors, journalists, watchdog groups, and the general public use Form 990 to evaluate organizations.

What's Excluded from Public Disclosure

Schedule B (listing of major contributors) is generally not made public for Section 501(c)(3) organizations, protecting donor privacy. However, political organizations under Section 527 must make Schedule B publicly available.

IRS Review

The IRS uses Form 990 to monitor compliance with tax-exemption requirements. While most returns are not audited, the IRS may select returns for examination if they show potential issues such as excessive executive compensation, significant unrelated business income, or governance problems. The information you report can also trigger automatic penalties for certain violations, such as failing to adopt required policies.

State Filing

Many states accept Form 990 to satisfy their charitable organization annual reporting requirements. Some states require you to file the Form 990 along with a state-specific cover sheet or supplemental form. Check your state's requirements—failing to file with the state can result in loss of your authorization to solicit donations in that state.

Maintaining Tax-Exempt Status

By filing Form 990 on time, you maintain your organization's tax-exempt status and avoid automatic revocation. The IRS maintains a searchable online database (Exempt Organizations Select Check) where people can verify your organization's current exempt status.

Three-Year Retention

You must make your three most recent Form 990s available for public inspection. After three years, you're no longer required to provide old returns to requesters, although the IRS may continue making them available indefinitely.

FAQs

Q1: Our organization had gross receipts of $195,000 but total assets of $525,000. Do we have to file the full Form 990?

Yes. You must file Form 990 if you meet either threshold—gross receipts of $200,000+ OR total assets of $500,000+. Since your assets exceed $500,000, you cannot file the simpler Form 990-EZ, even though your gross receipts are below $200,000.

Q2: We're a church. Do we have to file Form 990?

Churches, integrated auxiliaries of churches, conventions or associations of churches, and certain other religious organizations described in Regulations Section 1.6033-2(g)(1)(vii) are exempt from filing Form 990. However, if your organization is a Section 509(a)(3) supporting organization that supports a church, you may still need to file. Review the complete list of exceptions in the instructions or consult a tax professional.

Q3: What happens if we forget to file for one year?

File as soon as you discover the error, even if you're late. You'll face late-filing penalties of $20 per day (up to $10,000 or 5% of gross receipts, whichever is less) for organizations with gross receipts under $1,020,000 in 2011, or $100 per day (up to $51,000) for larger organizations. More importantly, if you fail to file for three consecutive years, your tax-exempt status will be automatically revoked, requiring you to reapply for exemption.

Q4: Can we file Form 990 if we're eligible for Form 990-N (the e-Postcard)?

Yes. If your gross receipts are normally $50,000 or less (and you're not required to file Form 990 or 990-EZ for other reasons), you can voluntarily file Form 990 or Form 990-EZ instead of submitting the simple Form 990-N. Many organizations choose to file the full form for transparency purposes, even when not required.

Q5: Our fiscal year ended June 30, 2012. Which form year do we use?

Use the 2011 Form 990. The form year is determined by when your fiscal year begins. Since your fiscal year began in 2011 (July 1, 2011) and ended 12 months later (June 30, 2012), you would use the 2011 form and report it as a fiscal year return in the heading.

Q6: We discovered errors in our filed Form 990. How do we correct them?

File an amended return using the same 2011 Form 990. Check the "Amended return" box in the heading section and use Schedule O to explain which parts and schedules you're amending and what changes you're making. File the complete form with all schedules, not just the corrected portions. The amended return must be made available for public inspection just like the original.

Q7: Where can we get help completing Form 990?

The IRS offers a toll-free help line for tax-exempt organizations at 1-877-829-5500 (Monday through Friday). You can also subscribe to IRS email updates for exempt organizations at www.irs.gov/eo. Many organizations hire accountants or attorneys experienced with nonprofit tax compliance or use specialized Form 990 preparation software.

Additional Resources

• IRS Form 990 Instructions (2011)
• IRS Form 990 (2011)
• IRS Exempt Organizations Page: www.irs.gov/eo
• IRS Toll-Free Help: 1-877-829-5500

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