Between the dozens of responsibilities that crop up within the course of running a nonprofit organization—from cultivating donors to event planning—filing tax returns probably isn’t at the top of your list of priorities. However, organized and accurate accounting is critical to your nonprofit’s operations because it allows you to uphold your tax-exempt status. 

In particular, there’s a specific financial report that is essential to the nonprofit tax reporting process: Form 990. In this guide, we’ll dive deeper into the different kinds of Form 990 your nonprofit needs to consider, as well as insights and best practices to ensure that your nonprofit is able to breeze through the tedious tax filing process. We’ll explore: 

• The Importance of Form 990 for Nonprofits
• 4 Key Types of Form 990 to Know
• Tips to Keep in Mind for Filing Form 990

Before we break down the differences between each Form 990, let’s review what makes this form such an important part of nonprofit accounting. 

The Importance of Form 990 for Nonprofits

Form 990 is a document that should sound very familiar to many nonprofit professionals, as it’s a tax return form that charitable organizations need to file on an annual basis. However, exactly why do these tax returns matter for your nonprofit? 

Here are just a few of the reasons that Form 990 is important for nonprofit organizations: 

• Enables 501(c)(3) organizations to remain tax-exempt. As stated in Jitasa’s guide to fund accounting, “501(C)(3) organizations are required to report their finances and how their funds are used to the IRS. For nonprofits, this is completed through the Form 990,” which is what “allows some organizations to remain tax-exempt from year to year.”

• Gives nonprofits the chance to assess their finances. As you account for your nonprofit’s resources to complete Form 990, you’re given the perfect opportunity to take stock of your financial situation and assess where funds are going. This enables you to evaluate your nonprofit’s overall financial health and, subsequently, make sure that your funds are being allocated as effectively as possible in the future.

• Allows for further public transparency and accountability. On a legal and practical level, your nonprofit has a responsibility to report its finances to the government, staff members, and stakeholders. Moreover, you also have a duty to show donors that you are honoring their wishes and using their gifts responsibly. Form 990 gives you a publicly-available document to hold yourself accountable and remain financially transparent to these entities.

While your nonprofit’s staff may not be jumping for joy at the financial reporting needed to complete Form 990, it’s undeniable that this document carries major advantages for your nonprofit. Beyond allowing you to maintain your nonprofit’s tax-exempt status, it also acts as a litmus test to help people within and beyond your organization keep tabs on the state of your finances.

4 Key Types of Form 990 to Know

Now that we’ve covered the “why” of Form 990 and its benefits to nonprofit organizations, let’s move on to the “what” by exploring the four main types of this document that nonprofit professionals should be familiar with. 

The “Full” Form 990

While every document we’ll discuss is a variation of Form 990, this is the full version of the document. Unsurprisingly, the full Form 990 is a bit longer than modified versions and includes various questions about nonprofits’ finances. For example, here are just a few details this multi-page form will ask for: 

• An organizational summary
• Compensation distributions
• Complete statements of revenue, expenses, net assets, and accounting
• Information about governance and organizational management

Form 990 is meant for larger nonprofits and should be completed by organizations with gross receipts that meet or exceed $200,000 or total assets that meet or exceed $500,000.

Form 990-N

Form 990-N, otherwise known as the 990 e-postcard, is the shortest version of Form 990. It is an electronic document that can be submitted to the IRS through its website. These are the main sections you’ll encounter on the form: 

• The tax year
• Confirmation of gross receipts (less than or equal to $50,000)
• Your organization’s name, mailing address, and website (if applicable)
• The name and address of your organization’s principal officer
• Your Employee Identification Number (EIN)

Form 990-N is a quick, short document meant for smaller nonprofits. It should be completed by organizations with annual gross receipts that are less than or equal to $50,000.

Form 990-EZ

While not as short as the 990 e-postcard, Form 990-EZ is an abbreviated version of the full Form 990. According to File990’s guide to Form 990-EZ, the document is four pages long and required to be completed by organizations with less than $20,000 in gross receipts or less than $500,000 in total assets. 

Additionally, the form asks for many of the same basic pieces of information that would be required for the standard Form 990, such as:

• Your nonprofit organization’s mission
• Specific details about your activities and projects
• Revenue 
• Expenses
• Assets and liabilities

Additionally, you should also be mindful of “schedules,” which are extra forms that request supplementary information about your contributors, financial statements, international projects, and other activities.

Form 990-PF

Form 990-PF is specifically designed for private foundations. No matter their size or gross receipts, all private foundations are required to complete Form 990-PF. For example, this includes: 

• Taxable and tax-exempt private foundations
• Organizations that claim or agree to foundation status, even if their applications for exempt status are still pending or not yet submitted
• Organizations that indicated an election under section 41(e)(6)(D)(iv), the section regarding Credit for Increasing Research Activities

This form is the most unique from the other versions of Form 990. Private foundations should reference the IRS’s information on Form 990-PF to gain as much insight as possible before filing their documents. 

Tips to Keep in Mind for Filing Form 990

Not filing Form 990 on time or filing it incorrectly is a massive headache that your organization shouldn’t have to worry about. Beyond putting your tax-exempt status at risk, improper filing also runs the risk of incurring financial penalties. For each day that your organization is late in filing Form 990, you could be penalized anywhere between $20 to $100.

To avoid these unnecessary punishments and make the accounting and Form 990 completion process as easy as possible, consider these tips: 

• Maintain good data hygiene. Good nonprofit data hygiene includes all of the activities and procedures that a nonprofit carries out to eliminate errors, organize data, and keep information up to date in its CRM or database. This not only allows nonprofits to create more effective donor outreach, but also enables organizations to easily gather accurate information on their finances and quickly fill out financial reports and documents. 

• Keep an eye on the calendar. Don’t allow the due date for Form 990 to creep up on you. Instead, be sure that the individuals or teams responsible for dealing with the document are aware of each year’s filing date well in advance. This will give your organization plenty of time to get your information in order. For reference, Form 990 is due on the 15th day of the 5th month of each calendar year.

• Partner with an e-filing provider. Even with plenty of time and all your ducks in a row, filing Form 990 can still be a stressful and confusing process. That’s where choosing the right e-file provider can be an invaluable resource for your team. With effective e-filing tools, you can protect your information with cybersecurity features, track your forms as they move through the review process, and use intuitive AI software to easily complete sections of the form you may be confused about.

By taking these steps, you should be able to reduce major stressors related to the tax filing process and pave the way for a more organized, streamlined pipeline for financial management.

Getting ready for tax season and submitting your records to the IRS can be a daunting prospect for any nonprofit organization. However, there are many steps that you can take to prepare yourself for this annual responsibility. In particular, with these insights on the different versions of Form 990 and the best practices for completing them, you can minimize the challenges of the tax season and keep your nonprofit on track for continued financial success.

About the Author

Mathew Tooker

Mathew Tooker is an expert in sales forecasting, analytics, goal-setting, client growth, and business development. With experience serving the Greek life community, nonprofits, and other member-based associations, Mathew is dedicated to providing tremendous value to his clients. 

When he’s not moving organizations forward, you can find him on the golf course, spending time with his two dogs, Reagan and Teddy, running marathons, and watching the Atlanta Braves. He’s also a graduate of Auburn University and a part-time MBA student at Florida State University.