Financial Reporting to the Federal Government
An organization holding a tax exemption from the federal government is relieved from paying any federal corporate income taxes but not from making annual reports to the federal government detailing exactly what its financial situation is. An organization must tell the federal government where its operating money came from and how it was spent. The completed form — Form 990 — is considered a public document, open for examination by anyone at any time with no requirement to state a reason.
This transparency is one of the tradeoffs your organization must accept in exchange for nonprofit status — you and your organization are now public in every sense of the word. The IRS website maintains a database open to the public. The site allows anyone to search for and read Form 990 or 990-N of any nonprofit in the country holding federal tax-exempt status.
Must every nonprofit organization file a Form 990?
No. If your receipts for the year were less than $25,000, you do not have to file the complete form but must file Form 990-N, an electronic postcard only accessible through the IRS website. There is no hard copy version of this form, so all filings must be done electronically.
The 990-N
Since most new nonprofits will have receipts in their first year well below the $25,000 threshold requiring them to file the complete Form 990, an explanation of the 990-N is appropriate.
The process for filing is easy and straightforward. First, go to the IRS website, locate the Form 990-N link, and set up an E-Postcard account. Before you begin filling out the form, be sure you have the following necessary information at hand:
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Tax year (be careful not to insert the current calendar year)
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Legal name and mailing address of the organization
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Name and address of the principal officer (the name of your board president is sufficient)
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Any other names the organization uses (this enables cross-referencing by people conducting searches)
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Website address, if you have one
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Confirmation that annual gross receipts are normally $25,000 or less
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A statement that the organization has terminated or is terminating (going out of business), if applicable
Consider purchasing a quality accounting package. Most of the major brands have programs specifically designed for nonprofits, including seamless integration with the federal reporting forms. Although they may be expensive for some groups, it is money well spent.
Organizations with gross receipts over $25,000 must file the complete Form 990. If you followed the basic guide in setting up your books to be in line with the needs of that form, it should not present any trouble.
