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How to Prepare for Preparing Your 990

Calculator and pen on top of a financial documentWhether you prepare your own Form 990 or outsource it, you can make the process less painful by following some simple steps and gathering certain information well before prep begins. Having a plan will save you time and help expedite the process.

Your organization’s gross receipts usually determine which version of the 990 you are required to file. You can check the IRS website to see which form your organization should file.

Your 990 is due the 15th day of the 5th month after your fiscal year ends. If your fiscal year ends on December 31st, your Form 990 is due by May 15th. You can get an automatic three-month extension, which makes the due date August 15. You also have the option to file for a second three-month extension. If you use the second extension, your final due date will be November 15.

Some preparation can only be done after your fiscal year ends. Understanding each step and being proactive, however, will make your 990-filing experience easier than it will be if you don’t prepare.  This list is not all-inclusive, as each organization is different. Many steps are common for all filing organizations. So here they are!

Steps for making 990 prep less complicated and less stressful

  • BE PROACTIVE—discuss with your team ahead of time rather than just before the due date.

  • Financial review or audit: Review the audit requirements for your state.

    • Be aware of requirements BEFORE you begin 990 prep.

  • IRS extension: Consider ahead of time if you think you’ll need to file an extension. If you know you need an audit, remember that the earliest most audits can be scheduled is March or April. That an audit can take four to six weeks or longer to be completed. If you believe your audit won’t be ready in time, plan to file an IRS Extension BEFORE the Form 990 due date.

  • Review your 990 for the previous year.

    • Your prior-year form will provide insight into what will be required for the current year.

      • Look at which 990 Schedules were included last year and what information was needed to complete those schedules. You will need much of the same information.

      • Check the IRS website to confirm which schedules you’ll need to file this year.

  • Close books for year-end:

    • Reconcile ALL bank/checking/savings/investment accounts, etc.

    • Record any journal entries necessary; accruals, AR, AP, prepaids, depreciation, etc.

    • Perform year-end book review: review all activity for all accounts.

      • Review all balance sheet accounts (statement of financial position)

      • Review all profit & loss accounts (statement of financial activity)

      • Identify any transactions or entries that may have been recorded to an incorrect account (e.g., office equipment recorded under rent), consider if there is a more specific account for certain transactions, or determine if you need to create a new account.

      • Consider your capitalization policy—transactions for equipment or computers that should be depreciated rather than expensed.

      • Do you have insurance prepaids that need to be expensed each month?

      • Confirm that federal and state payroll tax payments are adjusted correctly from liability account.

      • Examine special event gift revenue vs. non-gift revenue and direct expenses.

      • And many others.

  • Gather financial information:

    • Financial reports

      • Balance sheet, profit & loss, P&L by class/program/location

      • Account/journal details for accounts that require detailed reporting on the 990.

    • Copies of W2s, 1099s

    • Donor details for Schedule A and Schedule B

  • Non-financial information

    • Establish whether you’ll need to update the organization’s name, address, and telephone number

    • Update your board of directors list—names, titles, amount of compensation

    • Review Parts IV–VII to determine which other information may be required.

    • Determine who will review your 990 internally before submission—executive director, board of directors, subcommittee?

    • Determine who will sign the 990 and when this person is available/unavailable?

  • Timing

    • Provide ample time for board review and any comments or changes before the filing deadline. A board review is not required but is strongly encouraged.

It may seem like it takes more time to gather information than to prepare the 990, but the extra time spent before prep will pay off in the end. Whether you file a Form 990 long form or Form 990-EZ short form, prep time can be drastically reduced by following the steps outlined above. You may decide that some steps do not apply to your organization, and you may come up with other time-saving actions of your own. Whatever the case may be, understand that preparing and filing Form 990 is extremely important to your organization; don’t think of it as an afterthought or another menial task that needs to be completed. Your mission, and the cause it supports, is much too important not to consider the importance of your Form 990.

Jeremy CorkJeremy Cork is manager of tax services at Jitasa.

Topics: IRS Form 990 IRS Form 990-EZ
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