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De-myth-ifying IRS Form 990

Every day we hear questions and comments about IRS Form 990 from novices and sophisticated users alike. Following are some misperceptions we encounter.

Myth: All nonprofits must file a 990.

The following organizations are not required to file a Form 990 or 990-EZ:

  • Organizations with annual incomes of $25,000 or less
  • Most faith-based organizations, regardless of size
  • Subsidiary organizations whose parent organization or national headquarters files a 990 for the entire organization
  • Nonprofits that have not applied to the IRS for exemption from federal income tax
A substantial number of nonprofits fall into these categories.

Every private foundation, however, must file a Form 990-PF, regardless of its size. Most other nonprofits that (a) have incomes of more than $25,000; (b) are tax exempt under Section 501(c), 527, or 4947(a)(1) of the U.S. tax code; and (c) do not fall into the categories listed above must file a 990 or 990-EZ.

Myth: The 990 is a tax form.

Forms 990, 990-EZ, and 990-PF are information returns or reporting forms. The organizations that file these forms do not pay federal tax on income related to their exempt purposes and programs, although many private foundations do pay an excise tax based on their investment income. Some nonprofits have additional income not related to their exempt purpose; this unrelated business income is reported on Form 990-T. Organizations are not required to make Form 990-T available for public inspection.

Myth: GuideStar used to let people view 990 images for free, but now you have to pay to see them.

You can still search the database and look at the three most current 990s we have received from the IRS for an organization for free. You can also view any 990s a nonprofit has posted with its GuideStar Report for free. A simple, no-cost registration is all it takes to view these documents and more.

Myth: All 990 filers must file Schedule A, which shows the compensation of the five highest paid employees other than directors, officers, and trustees.

Only Section 501(c)(3) public charities and organizations exempt under Sections 501(e) (cooperative hospital service organizations), 501(f) (cooperative service organizations of operating educational organizations), 501(k) (child care organizations), and 501(n) (charitable risk pools) are required to file Schedule A. Thus, although you may find a Schedule A accompanying the 990 for your local 501(c)(3) humane society, you will not find one for your local 501(c)(6) chamber of commerce.

Also, Schedule A lists only those employees whose compensation is more than $50,000. Many nonprofits required to file Schedule A have no employees at that level of compensation.

Myth: You can find out who made large contributions to an exempt organization by looking at the nonprofit's 990.

Only if the organization is a 501(c)(3) private foundation, 4947(a)(1) non-exempt charitable trust, or 527 political organization. Private foundations and charitable trusts list donor information on Schedule B of Form 990-PF; 527 political organizations list donors on Form 8872.

Donor information on 990s filed by other organizations, including 501(c)(3) public charities, is confidential. Contributors are listed on Schedule B; when either the IRS or a charity releases that organization's Schedule B, the donors' names and addresses are masked on the copy. Also, as of November 2002, the IRS releases Schedule B only upon specific request.

Myth: There is one filing deadline for Form 990.

The filing deadline for Form 990, 990-EZ, or 990-PF is "the 15th day of the 5th month after [an] organization's accounting period ends." Thus, if a nonprofit's fiscal year ends on December 31, its 990 will be due May 15 of the following year. If the fiscal year ends on June 30, the 990 due date is November 15.

A nonprofit can get an automatic three-month extension by submitting Form 8868 to the IRS. The organization often can get another three-month extension by submitting a second Form 8868.

Thus, a nonprofit can legitimately file its Form 990 with the IRS 11 months after its fiscal year ends:

Accounting Period 990 Due Date Due Date with 1 Extension Due Date with 2 Extensions
1/1/2003-12/31/2003 5/15/04 8/15/04 11/15/04
7/1/2003-6/30/2004 11/15/04 2/15/05 5/15/05

Myth: GuideStar has 990 images for all organizations that file them.

Not yet, but they're on their way. The IRS began scanning all organizations' 990s in April 2005; we will add those images to the database as we receive them. The organizations themselves are also invited to use our new eDocs service to upload their 990s to their GuideStar Reports.

suzanne-coffman-150x150.jpgThe preceding post is by Suzanne Coffman, GuideStar’s editorial director. See more of Suzanne’s sector findings and musings on philanthropy here on our blog. 
Topics: Nonprofit Leadership and Practice IRS 990