IRS Form 990 is an Opportunity for Not-for-Profits to Shine

IRS Form 990 is the information return that is filed annually by most tax-exempt organizations, including charities and fundraising organizations. Just like any other return, it is vitally important to comply with the IRS requirements. What makes Form 990 unique is that it reports extensive information on operations, programs and governance and contains not just financial data, but written narratives and opportunities to provide supplemental information as well. Because Form 990 is available to the public, fundraising organizations that view it as merely another compliance requirement are missing a golden opportunity to shine a light on their organization’s accomplishments and attract support for their causes.

Here are some tips to help you or your clients make the most of Form 990 as a promotional tool:

Be mindful of your audience. With few exceptions, organizations are required by law to make their Form 990 returns available to the public. There are several widely accessible online databases, the largest being GuideStar, from which the public can easily access that information at no cost. Also, many online fundraising platforms, such as CrowdRise, Network for Good and Kimbia to name a few, interface with GuideStar’s database to provide would-be donors access to Form 990 information. When preparing your Form 990, consider who is reading your return: your constituents, including clients, customers and citizens in the communities you serve, and others who put faith in your organization. Also, consider your current and prospective donors. These individuals have the expectation that their participation and contributions of time and money are put to good use. Other groups and individuals who may read your Form 990 include community leaders who influence local policy decisions, other not-for-profits and the media.

First impressions matter. The first thing a reader will see about your organization is a written statement on the front page in Part I, Line 1 that describes the organization’s mission. Be concise and try to avoid using an overflow schedule so that a reader will immediately understand what the organization does.

Ask your communications director to help. The language used throughout the return should mesh with the organization’s communications materials, including information reported on the website, annual report and fundraising appeals. Give special attention to the Statement of Program Service Accomplishments in Part III, which is a written narrative that tells readers how the entity achieves its mission. Provide specific quantitative information about accomplishments during the current tax year. For example, for an education program, you might describe the nature and number of classes offered, the number of pupils participating and completing the program and the successes of program participants (for example, employment statistics) compared with a similar population not receiving the same services.

Think beyond the minimum requirements. An organization not required to file can still voluntarily file Form 990. Also, it is not uncommon for small organizations to file the full Form 990 even if they are only required to file Form 990-N (e-Postcard) or the shorter Form 990-EZ. For example, some churches who are exempt from the annual Form 990 filing requirement will voluntarily file to demonstrate greater transparency or attract potential donations. Grantseekers may file because some foundations require grantees to furnish a copy of their Form 990. Also, some organizations will use the Form 990 overflow schedule to further explain information that could be confusing to readers, even if there is not a specific IRS instruction requiring more detail. Note that if you do choose to file a return that is not required, you should still comply with all of that form’s requirements; that is, you can’t selectively choose which parts to complete and ignore the rest.

Don’t be afraid to request an extension. Two 90-day extensions of time to file are available. The first extension is an automatic request; in other words, the IRS will approve it automatically with no questions asked! I never hesitate to file the first extension if additional time is needed, which is not all that unusual. The second extension requires the organization to detail the reasons for needing another 90 days of time to file. To request an extension, use Form 8868.

Preparing Form 990 is not just about getting all the correct numbers in the right boxes to satisfy the IRS. If you view it that way, you may be missing out on an opportunity to help your organization or client stand out from the rest.

To learn more about tax compliance and access financial management resources for not-for-profit professionals and their business advisors, check out the AICPA’s Not-for-Profit Section. Here you can find Form 990 checklists, preparation tips, red flags and more. Visit: www.aicpa.org/nfp.

Mission image courtesy of Shutterstock.

IRS Form 990 is an Opportunity for Not-for-Profits to Shine

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