Now is the time of year when many nonprofits are preparing and reviewing their Form 990s in anticipation of the May 15th deadline. It’s important to take a minute or two and reflect on why the filing matters. First off, the Form 990 is an informational return that provides an abundance of information about the organization that goes beyond the financial information. Most importantly, it’s widely available for public inspection. Lastly, the Form 990 provides insight regarding an organization’s governance, operations and programs.
To state the obvious, the other reason the filing matters is it is a requirement for maintaining tax-exempt status. The Form 990 informs the IRS about activities, financial status and also demonstrates how the organization is meeting the qualifications of a specific classification of tax-exempt status. Organizations that do not file for three consecutive years will lose tax-exempt status.
It is more important than ever to file a complete and accurate return. Penalties for failure to file range from $20 per day for small organizations up to $100 per day for organizations with gross receipts greater than $1 million. The IRS is using the information gathered from Form 990s to develop potential indicators of noncompliance for their exam process. Filing a complete and accurate return is important to avoid IRS scrutiny.