Importance of Form 990 for Non-Profit Organizations
Even though non-profit organizations are exempt from income tax, they are obligated to file their income tax informational returns, usually on Form 990 with the IRS. Form 990 is an important document that many corporate donors and government agencies refer to before making decisions on the organization they want to donate to. Form 990 is also a public document that is easily available for anyone to review an organizations policies and controls and how it is managed by its governing body and how donated funds are used for the purpose that organizations are formed for.
A not-for-profit organization is required to file an annual informational return on Form 990 by the 15th day of the 5th month after the fiscal year-end. If the form 990 is not submitted on the due date consecutively for three years, the IRS may revoke its tax-exempt status.
The form 990 is quite detailed and include questions related to its controls and monitoring procedures, such as if the nonprofit organization has a conflict of interest policy, whistleblower policy, document retention policy, to name a few and other questions related to responsibilities of a nonprofit Board, such as if there are proper procedures to authorize compensation of officers, and if the Board reviews the Form 990 before it is filed with the IRS, etc. It is therefore very important that a nonprofit seek guidance from a professional CPA to prepare and file its Form 990.
IRS Form 990 for Non-Profit Organizations
The Board of a nonprofit should develop key operating and governing policies, such as:
1- Disclosure and documentation of any conflict of interest.
2- Roles and responsibilities of the Board, and key officers of the nonprofit.
3- Written accounting policies and procedures to follow.
4- Compliance and regulatory requirements and assignment of the responsible party.
5- Financial review and reporting responsibilities.
6- HR policies, including a procedure to approve the compensation of key officers and board members, etc.