Let’s dive in!
1. Which Form 990 Does Your Nonprofit Need? 📝
Nonprofits must file an annual Form 990, but the version depends on your revenue:
- Form 990-N normally applies to organizations with less than $50,000 in revenue.
- Form 990-EZ requires more financial details from nonprofits with revenue between $50,000 to $199,999.
- The full Form 990 applies to organizations with revenue over $200,000 and requires a comprehensive financial and programmatic report.
The good news is that the 990-N and 990-EZ are relatively straightforward, so most nonprofits can file it themselves. Form 990-EZ is slightly more complicated, but as long as you have all necessary information, you can still complete it on your own (just plan to spend at least a couple of hours working on it). Once you reach the level of filing a full Form 990, however, you should probably consider working with a CPA or tax expert. Having an accountant, CPA, or bookkeeper on your board is an excellent way to maintain organization throughout the year.
Keeping well-organized financial records is key—CPA Pablo Centeno recommends tracking more than the bare minimum to make life easier down the road for audits, grants, and long-term growth.
📌 Need the latest Form 990? Download it from the IRS website.
2. Avoid Common 990 Filing Mistakes 🚨
Tax season stress usually comes down to a lack of preparation. Common mistakes include:
- Disorganized records. Gathering financial documents (receipts, invoices, etc.) too late makes everything harder.
- Missing the deadline. Filing Form 990 late can lead to penalties. If you need more time, request an extension before the May 15 deadline.
- Waiting too long for help. Accountants and tax pros book up fast this time of year! Early prep = fewer errors and less stress.
💡 Quick fix: Keep organized records year-round to avoid scrambling at the last minute. In my own organization, we scanned every receipt, reconciled them with accounting software, and had an easy-to-remember naming convention for electronic files so anyone could find what they needed at any time!
3. Should Nonprofits Use Tax Filing Services Like H&R Block or TurboTax? 🤔
The short answer: nope—here’s why: As of this message, these platforms are not designed for nonprofits and do not support Form 990 filings. Here’s what to use instead:
- Filing a 990-N (for small nonprofits under $50K in revenue): The IRS has a free e-filing tool for you!
- For larger nonprofits (filing a 990-EZ or full 990): You’ll need to use an IRS-approved e-filing provider or work with a nonprofit tax pro to ensure everything is correct.
💡 Why it matters: Your Form 990 is a public document (that’s right – anyone can look it up and review your finances online). File it correctly to maintain trust with donors and funders.
4. Key Financial Records to Keep Handy 📂
Want tax season to be stress-free? Pablo recommends that every nonprofit—big or small—should keep these key documents updated:
- Statement of Financial Position (aka your balance sheet)
- Statement of Activity (your profit and loss statement)
- Statement of Functional Expenses (breakdown of program, admin, and fundraising costs)
- Grant & funding records (where your money is coming from)
- Program descriptions (what your nonprofit does & how funds are used)
- Board member, donor & employee lists (keeping leadership & donor records current)
💡Pro tip: Keeping records updated all year means no surprises or last-minute stress. Also, ensure proper tracking of donor restricted contributions.
5. What Triggers an IRS Audit? 🚨
While most SMALL nonprofits won’t face an audit, certain red flags can increase the risk:
- Transactions with disqualified staff members such as board members. If these transactions occur, you must have sufficient documentation to demonstrate that no individual benefited improperly. Loans and unreasonable compensation fall under this category.
- Unrelated business income – If too much revenue comes from activities unrelated to your mission (like selling miscellaneous merchandise), your tax-exempt status could be at risk. Experts suggest keeping it under 10–20% of total revenue.
- Foreign Activity: Whether your nonprofit is sending grants abroad or working with international partners, this can raise a red flag for the IRS. That doesn’t mean you shouldn’t do it, but it does mean you need to be extra thorough. Keep clear records and do your homework, as good documentation and due diligence are key to staying compliant.
6. Year-Round Habits for a Smoother Tax Season 🗂️
Want next year’s filing to be easier? Start these habits now:
- Keep financial records updated—track revenue and categorize expenses regularly.
- Maintain accurate donor, employee & board lists to avoid last-minute scrambling.
- Educate your leadership team on nonprofit tax basics to ensure compliance.
📌 Free resource: The IRS Virtual Small & Mid-Size Tax-Exempt Organization Workshop. Pablo recommends it as a good starting point for anyone looking to improve their understanding of nonprofit tax requirements.
7. Preparation for Long-Term Success ✍️
Strong financial management keeps your nonprofit focused on impact. A well-prepared 990 builds donor confidence, ensures compliance, and strengthens financial stability.
Need expert guidance? Visit Telos CPAs or connect with Pablo on Instagram and Facebook.
Let’s make tax season easier—starting now!
