Know Your Form 990, Part 1: Filing a Fine Form

Depending on your organization’s fiscal calendar the deadline for filing your Form 990 may be fast approaching or is past and you’re already thinking about (okay, dreading) next year’s filing.  Either way, it’s always a good time to ponder your organization’s IRS Form 990, the NFP tax return.  This form has been getting a good bit of attention lately as the IRS is continuing in its quest to make the information on the form more readily available to regulators and the public.  So, it is more important than ever to think of your Form 990 as a public facing document and to give it the attention it requires.

Here is a quick list of Form 990 Best Practices;

1. Be complete, but concise
   1. Do not skip sections or questions
   2. Review the form for grammar and typographical errors as the form is a public representation of the organization
   3. Be sure to add commentary, especially Schedule O, if the item requires it
   4. Keep narrative focused, clearly written and accurate
2. Understand and follow instructions
   1. Even if your CPA firm completes the document, you are responsible for it
   2. Your most senior Finance executive should demonstrate a good understanding of the form and must stay current on IRS communications and activities associated with the form
   3. Be careful of supplemental schedules, they need to be completed when required and should always be reviewed
   4. Don’t go on auto-pilot, the form does change a bit from year to year. Typically, if there are major revisions to the form, the IRS will issue a notice, so it’s a good idea to check the IRS website as part of the preparation process
3. Conduct a full, complete and comprehensive review
   1. After the Finance folks are done, the President/CEO/ED should review
   2. Then the Board should review. Note that instructions for the form indicate that the review process should be documented and disclosed
   3. This review is a good time for the Board and management to discuss the form, changes from prior years and to bring new Board members up to speed on the organization’s answers to Form questions
4. Public Facing Document
   1. Management and the Board should review sections that describe how the organization is performing (such as Part III, question 4a) from the perspective of donors or volunteers. Does the narrative support or align to other messages being communicated from the organization?
   2. Compensation information is included on the form
      1. Make sure that compensation practices are reasonable, align to the overall mission of the organization and are properly disclosed
      2. Make very sure that staff members whose compensation is included on the form are notified
   3. Along with regulators and donors, the press has access to the information on the Form 990, so review the document for any information that may appear unflattering to the organization if included in an article
5. Pick a CPA firm with experience
   1. The Form 990 is a public representation of your organization as well as a regulatory document
   2. When selecting a CPA firm to support your Form 990 completion, ask how many Form 990s does the firm complete and what level of complexity they are experienced with
   3. Discuss any complex topics, such as Unrelated Business Income Tax, the firm should be well versed in how to handle these items
   4. Your CPA firm should be up to date on best practices and IRS communications about the form and should bring this information to your Finance team on a recurring basis

The Form 990 is one of your most public facing documents and it is becoming more accessible every day.  Consider this when preparing and reviewing the document and you will be well on your way to filing a fine form!

Coming soon, Part 2 of this article which will summarize a few of the items that will tend to trigger an IRS audit.

Learning is a shared experience, so please share your thoughts on this topic in the comments section. Best regards! –mike