How to Schedule a Form 990 for IRS Tax Exemption
Form 990 is a tax form that tax-exempt organizations are required to file annually with the Internal Revenue Service (IRS) in the United States.
It is probably the most important and well-known IRS tax forms as you will need to fill out various forms of it in order to claim tax relief or exemptions. And we are all interested in reducing our tax bill where possible.
There is a link to form 990 on the IRS website and there are 16 schedules, or sections, in total, A to O, and R. I don’t know why P has been excluded.
We will take a closer look at some of the more relevant sections for our readers plus some general tips on how to schedule a form 990.
Some but not all schedules have instructions, as shown in the image below, but we give details on some of the more interesting and relevant ones.
The IRS Form 990 Schedule A
The main type of organization in schedule A that needs to schedule a form 990 is a public charity rather than a private foundation but like most IRS criteria there are a few other organizations who qualify such as non-exempt charitable trusts that are not treated as private foundations.
One of the important parts of the form 990 schedule A is explaining the reason for the public charity status for the tax year.
There are some good examples based around having an exemption letter and the role the organization plays in charity work, for example if it is a direct charity or plays a supporting role.
Churches can be exempt, which can be a very controversial issue with the reported revenue and personal wealth of some organizations and individuals involved in religion.
You can read more about how churches make money here.
Other more commonly accepted charity work such as health care and hospitals also can be tax exempt and have examples.
It also covers unusual grants, which include Covid/Coronavirus grants under the CARES act (Coronavirus Aid, Relief, and Economic Security). Organizations that are mainly staffed by volunteers such as book fairs should also check to see if they need to file a form 990.
What you are giving the IRS here is detailed information about their activities and finances, including the types of programs you offer, the sources of revenue, and the ways in which you use your funds.
Organizations also need to provide information about their governance structure and any relationships they have with other organizations or individuals.
Form 990 Schedule A also asks for information on the organization's public support, which includes donations from individuals, corporations, and other organizations.
It also asks for information on the organization's activities, including whether it engages in lobbying or political activities. We will look more at political lobbying and activities in the next schedule, schedule C.
The IRS Form 990 Schedule C
Political lobbying also can qualify for tax exempt status, which is in Schedule C.
So those that make donations to politicians get a tax benefit, arguably this favors the rich more than the poor. There are limits which are explained under expenditure tests. The good news for any political lobbyists reading this is that lobbying expenditure is exempt, whether that is direct or through grassroots.
You will need to give the IRS a detailed description of political campaign activities to qualify which includes total expenditure on political campaign and lobbying activities, including the amount spent on direct lobbying and grassroots lobbying.
- Direct lobbying is defined as attempting to influence specific legislation or government action
- While grassroots lobbying involves attempting to influence the public to contact legislators or government officials about specific legislation or government action.
Schedule C also requires organizations to report information about any grants or contributions they make to other organizations that engage in lobbying activities.
Organizations must also report the names of any employees or contractors who have engaged in lobbying activities on behalf of the organization.
The IRS Form 990 Schedule D
Schedule D covers art and historical treasures, heritage organizations such as museums or other organizations that rely on donations. Buildings on the National Register of Historic Places are eligible as are conservation easements.
As this blog is about personal finance this schedule is of interest to us as it covers stocks, bonds, and other securities as well as escrow and custodial arrangements in part IV as well as endowment funds in part V.
You can read about what is a quasi endowment here.
You report to the IRS the fair market value of your investments at the beginning and end of the tax year, as well as any gains or losses from the sale of investments during the year.
It also requires organizations to report information about their investment managers, including their names, addresses, and compensation. You also need to report information about any partnerships or joint ventures they are involved in, including their share of any income, gains, losses, deductions, or credits from those activities.
Depending on your other answers you may be able to claim ax relief on land buildings, equipment though part VI but also on investments such as stock in part VII
The IRS Form 990 Schedule G
Another interesting schedule is schedule G which covers fundraising and gaming. If you report more than $15,000 from gaming you must check part III which includes information on gaming activities such as bingo where you provide information on your cash prizes, value of non-cash prizes expenses, and other information.
Schedule G also covers details where if you use a professional fundraiser or fundraising consultant, you must report detailed information about the arrangement, including the fees paid, the services provided, and the expenses incurred.
Summary of Filing IRS Form 990 for Tax Exemption
The due date for filing Form 990 depends on the type of organization it is and its fiscal year. Here's a general guide to help you schedule a Form 990:
- Determine your organization's tax year: Form 990 is due by the 15th day of the 5th month after the end of your organization's tax year. For example, if your organization's tax year ends on December 31, the Form 990 is due by May 15 of the following year.
- Figure out the type of organization: This can be tricky, the due date for Form 990 may vary based on the type of organization. As we have shown churches and church-affiliated organizations are generally not required to file Form 990.
- File on time: Of course as always it is important to file Form 990 by the due date to avoid late filing penalties. Why cause yourself unnecessary stress by doing that, however if you do need an extension, you can file Form 8868 to request a 6-month extension.
- Choose the correct form: Depending on the size of your organization and the amount of gross receipts, you may be required to file a different version of Form 990. Hopefully this guide will help you, you can also check out the other schedules, but as mentioned before unfortunately some of them don’t have instructions.
- Gather your information: To complete the IRS Form 990, you will need to get information about your organization's finances, governance, and activities.
- Prepare and file the form: Once you have all the necessary information, you can prepare and file the Form 990 either electronically or by mail.
- Retain a copy: Keep a copy of the Form 990 and all supporting documents for your organization's records.
It's important to stay up-to-date with the latest tax laws and regulations to ensure that you are filing the correct form on time. You should also consider hiring a tax professional to assist you with the preparation and filing of Form 990, but I think it is a good idea to be at least familiar with the various common IRS forms and requirements
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