Navigating the New IRS Form 990
 by Jackie Cefola
NonProfit Center Program Manager
Third Sector New England’s NonProfit Center recently hosted a workshop intended to help organizations navigate the new reporting requirements for the revised Internal Revenue Service Form 990.
Facilitated by Catherine Gill of the Nonprofit Finance Fund, Leigh Tucker of Accounting Management Solutions and Nancy Kelly of the Metis Group, this workshop provided participants with both an overall understanding of changes as well as detailed suggestions for addressing particular “hot button” issues of interest to the IRS.
Providing Stakeholders with Detailed Information
The Form 990 is completed and reported to the Internal Revenue Service annually by all organizations that are exempt from federal income taxes and have gross receipts averaging $25,000 or higher. Governmental agencies review the form to ensure that a non-profit organization’s activities are in compliance with tax-exempt status. The form also serves a public purpose, allowing board members, donors and other stakeholders to access detailed information about an organization’s financial management, operations and governance.
Enhancing Transparency, Addressing Needs
As explained by Kelly, changes in the revised Form 990 are the most pervasive to be implemented in the past 25 years. New requirements were designed to:
- Enhance transparency for stakeholders and the public; and
- Increase tax compliance, and minimize the burden on filing organizations.
Changes were also intended to:
- Increase the IRS’s ability to assess risk of noncompliance;
- Address the shortcomings of the previous form regarding operations and governance; and
- Manage demand for changes in reporting as a result of the Sarbanes Oxley Act.
New Structure with a Focus on Process
The revised Form 990 contains two sections that include a core form with mandatory reporting requirements and 16 additional schedules that may apply depending on a nonprofit’s operations.
The core form summarizes an organization’s mission, programs, service accomplishments, governance, management, compensation and funding. Financial statements are also required in the core form, though their placement has been moved further towards back of the document. The form is comparative, requiring financial information from 2 years of operations.
Sixteen Schedules supplement the core form with requirements for detailed reporting about contributors, political and lobbying activities, supplemental financial statements, activities conducted outside the United States, fundraising, gaming, executive compensation and noncash contributions, among other topics.
A Comprehensive and Consistent Approach
Articles on Nonprofit
Budget and Finance
“With the new form, roughly 75 percent of the information provided addresses an organization’s governance and operations,” stated Kelly in summarizing the numerous revisions to the Form 990. “Twenty-five percent is financial reporting. Previously this ratio of information reported was reversed.”
Relatedly, Tucker strongly advised nonprofits to document their processes carefully, comprehensively and consistently throughout the form. “Organizations can have the best internal controls and reporting structures possible but without detailed documentation, that competency won’t be conveyed.”
Public Access and Communication Opportunities
While the revised reporting requirements and structure may seem cumbersome, the Form 990 has potential to help organizations to communicate more effectively with stakeholders.
Guidestar.org provides easily-accessible copies of organizations’ Form 990s. As awareness and understanding of the revised form grows, an increasing number of stakeholders will examine these reports for a variety of purposes. Consequently, nonprofits should consider the filing not only in the context of a legal requirement but also as a communications tool.
To this end, Gill suggests that the revised form should be used “to present an organization’s coherent story, with emphasis on governance and management.”
The Time Is Now
While implementation of the revised Form 990 will be phased in over the next 2 years, all of the workshop’s presenters advised that non-profit organizations start the conversation about filing requirements now to ensure that accurate and complete reporting for the IRS and other stakeholders.
For more information about the revised IRS 990 Form, please visit:
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