Internal Revenue Service (IRS) Form 990, titled "Return of Organization Exempt from Income Tax," is a tax return for charities and non-profit organizations. To use the form, the organization for which you are completing it must be classified as tax-exempt.
How to Complete the Form
Form 990 consists of a total of 12 pages, each of which must be completed. However, Part VIII, beginning on page 9, is a spreadsheet designed to assist you in calculating the organization's income and expenditures.
Unlike other IRS forms, Form 990 is easiest to complete if you begin at the end, with the spreadsheet. This is because the information you include here must be transferred to other parts of the form.
Beginning with Part VIII
Parts VIII-X require you to input the organization's financial information. You must provide this information for the beginning and end of the tax year, even if the numbers are the same. For example, if your tax year runs from January to December of 2010, you would input the requested information as it was on January 1, 2010 as well as what it was on December 31, 2010 in the appropriate space.
These spreadsheets are quite complex and specific. Thoroughly read each page to determine the information covered by individual entries prior to beginning. The form guides you through the required calculations. Once complete, you may then input the information on the pertinent lines where requested in other sections.
Completing Parts A-M
On the top portion of the first page of Form 990, you must provide the organization's contact information, total income, the number of organizations included on the return and the organization's domiciliary state. The majority of these sections are straightforward, but some require explanation.
Section A: Relevant Tax Period
Here, you identify the relevant tax period. This period may be the entire year or a specific portion of the year, such as the first or last quarter. Your selection depends on your organization's tax reporting and payment obligations, which is determined by its label, meaning whether it is a 501(c)(3) or another type.
Section B: Purpose of Return
In this section you identify the main purpose for filing a return. Options include it being the yearly required return, amending a previous return or a name or address change.
Section G: Total Gross Income
This section requires you to list how much income the organization received over the tax period. You determine this information by completing pages 9-12. Therefore, you may need to add this information once you have completed the entire form.
Section H: Affiliated Groups
The IRS recognizes that many non-profit groups have many different divisions and other affiliated groups. It allows you to report the income for all these groups on a single form.
Part I: Summary
In this section you provide a general overview of the organization. It is divided into four main parts: Activities and Governance, Revenue, Expenses and Net Assets or Fund Balances.
In the Activities and Governance area, you must provide a brief statement of the organization's mission statement. You must also identify the number of voting members on the board of governors, volunteers and any income not acquired through donations or investments. The Revenue, Expenses and Net Assets or Fund Balances require you to transfer information you provided on specific lines of the spreadsheet.
Part II: Signatures
This section contains space for the signatures of the organization's main officer and preparer, which is you. If you are also the main officer, you do not need to sign the form twice.
Part III: Statement of Program Accomplishments
Here, you must provide information about the organization's mission and whether its main projects and the revenue they generated accorded with it. This information tells the IRS whether the organization is a valid non-profit. An organization with incomes derived from major sources not affiliated with their mission may have established itself as a non-profit solely as a means to avoid paying taxes.
Parts IV-VI: Checklist for Reporting Requirements
These sections require you to indicate whether other reports commonly required to be filed by tax exempt organizations have been filed. If you answer "no" to any question and need to explain your response, you may do so on Schedule O.
Part VII: Compensation Amounts
Here, you must provide salary information for board members, key employees and independent contractors. You must also state how many hours per week the individual works. The main purpose of this information is to indicate whether the organization should not be tax-exempt: an organization with low revenue and income amounts, but which also has highly paid employees indicates that it may not be a charitable agency.
Completing Your Form 990
Form 990 is an extremely complex and thorough form. By beginning at the end, you can simplify your completion of the form, but doing so will not eliminate the need to perform mathematical calculations and provide extensive amounts of other types of information. Seek advice from a tax professional if you are unsure how to complete the form.