What is IRS Form 990?

The official IRS subtitle of Form 990 is Return of Organization Exempt From Income Tax. It is tempting to consider this a tax return because it so closely resembles a corporate tax form, but the IRS calls it an information return. The reason for this is that nonprofits are tax exempt, and therefore, they typically do not pay corporate income taxes. What the IRS wants is information, or details, about your nonprofit’s income, expenses, and activities during the past year – even if it’s nothing.

There are five versions of Form 990:

1. Form 990-N:

Form 990-N is the only version of the annual information return that isn’t really a form at all but rather an online-only data filing. In fact, it is referred to by the IRS as an e-Postcard. If gross receipts normally exceed $50,000, the nonprofit will have to prepare and file one of the longer versions. Here’s how the IRS defines normally under $50,000; it’s more complicated than it seems:

• The nonprofit has been in existence for 1 year or less and received, or donors have pledged to give, $75,000 or less during its first taxable year;
• Has been in existence between 1 and 3 years and averaged $60,000 or less in gross receipts during each of its first two tax years; and
• Is at least 3 years old and averaged $50,000 or less in gross receipts for the immediately preceding 3 tax years (including the year for which calculations are being made).

2. Form 990-EZ:

The name itself, Form  990-EZ, is somewhat of a misnomer. While it is certainly easier to prepare than other full0form variants, it is by no means easy. It is the lowest threshold version that really resembles a corporate tax return, only more thorough. In order to qualify to file Form 990-EZ, a nonprofit should have gross income of more than $50,000 but less than $200,000 during the past fiscal year. In addition, the total valuation of all assets should be less than $500,000. If an organization’s assets are worth more than that, a full Form 990 will be required, regardless of revenue.

3. Form 990 (long form):

As we have worked our way up the ladder of the various versions, from the e-Postcard Form 990-N, through Form 990-EZ, and now Form 990, we see that each successive version is much longer and requires more and more detailed information. This version is, by far, the most thorough one of the bunch. To be required to file Form 990, a nonprofit should have a gross income of more than $200,000 during the past fiscal year. Also, nonprofits with assets collectively valued greater than $500,000 must file Form 990, even if their revenue is less than $200,000. Form 990 is a beast of an information return. It is not uncommon for Foundation Group’s Compliance Team to prepare Form 990 returns for clients that exceed 50 total pages!

4. Form 990-PF:

Private foundations are a unique class of 501(c)(3) organization. As such, they have their own exclusive version of IRS Form 990, called Form 990-PF. Where Form 990-PF differs greatly from other, previously mentioned, IRS forms is in the filing threshold… there is none! Where public charities file a version of Form 990 that gets progressively more complex as income increases, private foundations are liable for the entire Form 990-PF, regardless of income. In fact, if a private foundation has zero gross revenue for the year, and even takes a loss on its investments, it still must prepare and submit a complete return.

5. Form 990-T:

Form 990-T is purely for Unrelated Business Income (UBI) purposes and is most directly akin to a for-profit corporate tax return.