5 Easy Nonprofit Finance Habits to Prepare You for Tax Time

Managing nonprofit finances can feel like you have the weight of the world on your shoulders. So many people depend on you to get it right.

One of the many important responsibilities you carry is filing your 990 IRS tax forms correctly, completely, and on time. In the scheme of things, this seems like just another of the many tasks you perform each fiscal year. Yet it’s one of the most crucial.

990 filing is important to your nonprofit for many reasons, including the following:

  • Your 990 form maintains your tax-exempt status. Organizations that fail to file three years in a row have their tax exemption automatically revoked, and they must reapply all over again. This process is time consuming and offers no guarantees.
  • Filing late or incomplete 990s is a costly habit. Missing a filing deadline or filing an incomplete or incorrect 990 means your organization may face fines and other penalties. Even filing for a 30-day extension takes extra time you could have saved by filing on time.
  • Your 990 is your nonprofit’s window to the world. Key donors, investors, volunteers, and other stakeholders rely on your 990 form to accurately portray your organization’s finances. This document often informs their fundraising decisions and the role they choose to play.

As you can see, filing your 990 isn’t just another financial decision, but a crucial task each and every year. Let’s cover a few important ways you can prepare for tax time and file with confidence and ease. 

Here are File 990’s 5 Easy Nonprofit Finance Habits to Prepare You for Tax Time.

1. Take 990 IRS Tax Prep Courses Online

Whether you’re new to filing or have been doing it for years, it can be deeply beneficial to check out the IRS’s online 990 tax prep and other nonprofit courses. 

These courses are geared toward 501(c)(3) organizations and include comprehensive education on the following topics:

  • Applying for Section 501(c)(3) Status
  • Maintaining 501(c)(3) Tax-Exempt Status
  • Form 990 Overview Course
  • Good Governance Makes Sense for Exempt Organizations
  • Required Disclosures
  • Employment Issues

All nonprofit treasurers or financial officers can benefit from these courses as, at the very least, a brush-up to ensure you’re filing to the best of your ability. 

You can also ask your finance committee, other board members, and other key financial players to take these courses.

2. Prepare a Backup Plan if You Can’t File

As the chief financial officer of your nonprofit, part of your job is to educate your fellow board members about past, present, and future predicted finances, as well as 990 filing and other important aspects of running a tax-exempt organization.

It’s your responsibility to ensure that your 990 is filed correctly and on time, but having a team-driven mentality can help you in the event you aren’t able to file.

The courses mentioned above can help, but it’s also crucial that others are well enough versed to cover your filing duties if there’s an emergency or other reason you can’t complete the filing process.

Late or incomplete filing can result in accruing fines, and not filing for 3 consecutive years will automatically cause your tax-exempt status to be revoked.

Set up your backup plan:

  • If you have a finance committee, they should be able to file in your absence, or else you might entrust key board members.
  • Past 990 filings and annual financial records should be transparent and accessible to those you entrust to file in your absence.
  • Educate board members often on key aspects of your organization’s finances.
  • Early preparation and holding board meetings specifically focused on filing the Form 990 can help organizations avoid last-minute catastrophes.

3. Conduct an Annual Audit

Chances are good that you’re already doing this, which is great. You want to ensure all your organization’s financial reporting is accurate and complete.

Some nonprofits conduct multiple audits per tax year, but at least one is a must.

Although the IRS doesn’t typically require one, for organizations of a certain size there may also be local, state, or federal requirements to have an independent audit.

  • Hold pre- and post-audit meetings to discuss your findings. 
  • Gather financial documents, including: reconciliation and bank statements; grant documentation; donor information; assets and depreciation schedules; your annual ledgers; payroll and staff tax documents (W2s and 1099s); etc.
  • Keep everything organized and easy to access for the 990 filing process—much of it will be used to fill out your tax documents and schedules. Review the previous year’s 990 form as well.

4. Keep Current on Your Tax-Exempt Status and Tax and Filing Rules

Be sure your organization hasn’t lost its tax-exempt status and is a registered/chartered nonprofit, current on all local, state, and federal requirements and filings.

Keep current on the newest 990 filing rules, typically listed on the opening pages of the 990 document or available via the IRS.

Depending on your total gross receipts and assets, there are several different versions of the 990 form you might file. Have your organization’s finances changed significantly since last year’s filing? 

Make sure you know which 990 form is right for you

Also, keep track of all state and local nonprofit rules and filing deadlines to avoid 11th-hour stress.

5. Use a Certified e-Filer

Using an IRS-certified e-Filing service can save you time and bring an extra level of consistency to the process.

File 990 will file your 990-EZ or 990-N form electronically, and all we need from you is some basic info about your organization to get started.

We’ll ensure you file on time by reminding you when your deadline is approaching each year, and by securely storing the data you entrust to our safekeeping.

We also offer an enterprise option for those who need to manage multiple chapters or entities.

Have questions about your 990 filing or want to learn more about our e-filing services? Call us at (859) 309-3641 or email info@file990.org.