Form 990 is the chief compliance tool used by the IRS to monitor compliance of tax-exempt, not-for-profit (NFP) entities. As a public document, it is also subject to scrutiny by regulators, media, and the general public, including potential donors. Needless to say, accurate reporting on Form 990 is critical to success for those working with NFPs.
Below are the top 5 tips for preparing the 2015 Form 990 series of returns.
1. Contrary to popular belief, the IRS form instructions for the Form 990 series of returns are very thorough and extremely helpful for even the most experienced practitioners. The AICPA Exempt Organizations Tax Technical Resource Panel reviews the Form 990 and instructions at least once a year and recommends changes and technical corrections to the IRS. The Form 990 Filing Tips on the IRS website are also a helpful source of information.
2. Look at GuideStar’s website. GuideStar gathers and publicizes information about not-for-profit organizations. The information available on the website can assist practitioners in many ways, such as the following:
- If practitioners have a new client with no prior year returns, copies of the returns are available on the website.
- Practitioners should review GuideStar to determine if there are any errors from the information actually reported on the return versus the information posted to the site.
- If you are not certain how to report a certain item on the Form 990, you may find a similar organization’s returns and check how it was reported.
- Review Form 990s of similarly positioned organizations, considering size, mission, and geographic area, to help determine and review executive compensation.
3. Use the AICPA’s checklists. There are checklists available for each of the forms in the 990 series of returns. They are available to Section members, and you can find them here.
4. Check the organization’s status in the IRS Masterfile.
5. Consider and review the following common technical errors for Form 990 (compiled by the AICPA Exempt Organizations Tax Technical Resource Panel):
- Part I, Summary – Confirm the information in the prior year column agrees with what was actually filed in the prior year. Do not assume technology will properly rollover the numbers.
- Part III, Statement of Program Service Accomplishments –Line 4 requires the organization to list the three largest program services so that separate programs should be separately listed and not aggregated on a single line.
- Part VI B, Governance, Management and Disclosure, Policies – The form instructions now indicate to answer “yes” only if the policies were approved by the governing board (not a department or committee) by year end. Otherwise, the organization must answer “no.”
- Part VII, Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent Contractors – Reportable compensation means Form W-2 LINE 5 not line 1. Therefore, the amount differs from that reported by the individual reports on Form 1040.
- Schedule A –Public Charity Status and Public Support – Part I, line 11h, column vii, the amount of support for supporting organizations includes only monetary support - not services. A supporting organization is a charity that carries out its exempt purposes by supporting other exempt organizations, usually other public charities. Non-monetary support provided to or purchased for the organization in the form of services, facilities or goods may be reported on Schedule A, Part IV Supplemental Information.
Form 990 Red Flags for 501(c)(3) Charitable Organizations
This article is intended to be used as a guide for a Form 990 reviewer to identify potential red flags that should be examined or considered prior to filing.
Introduction to Form 990: Not-for-Profit Tax Compliance
Learn the fundamentals of the Form 990 series of returns with this flexible, CPE-eligible online course featuring interactive learning exercises.
Form 990 Preparation: Not-for-Profit Tax Compliance
Learn to successfully prepare the challenging Form 990 series of returns with this video-based CPE eligible course.
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