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As a nonprofit professional, figuring out tax requirements probably isn’t the most fun part of your job. But it’s a necessary task to keep your organization up and running, allowing you to maintain your tax-exempt status and take stock of your fundraising progress. That’s why knowing the difference between each type of Form 990 is so important.

As you likely know, there are multiple types of Form 990s to choose from depending on your organization’s size. Working out the differences between each tax form type can quickly become confusing, so we’ve put together this handy guide to help keep everything straight. We’ll review the following points:

• Why do nonprofits have to file Form 990s?
• What are the four main types of Form 990s for nonprofits?
• Best practices for filing Form 990

Having a solid understanding of your nonprofit’s finances makes the annual tax season less complicated and stressful. And ensuring your financial requirements are squared away shows your community and supporters that your organization is dedicated to full transparency and financial responsibility. Let’s dive in!

Why do nonprofits have to file Form 990s?

Registered 501(c)(3) nonprofits are tax-exempt organizations, meaning they aren’t required to pay federal income tax. These organizations don’t receive this status automatically—they have to fill out Form 1023 to apply for exemption and submit a Form 990 every year to maintain their status.

In addition to maintaining tax-exempt status, there are a few other reasons why your nonprofit can benefit from filing Form 990s. Filing these forms:

• Provides financial transparency to the government and other stakeholders. Your nonprofit has a duty to remain transparent to not just the government, but to all stakeholders. That includes your staff, individual donors, volunteers, corporate donors, community members, and those who benefit from your services. Form 990s are publicly available, so any interested stakeholders can review your organization’s records and understand how you’re doing financially.
• Allows you to avoid penalties. If you fail to file Form 990, you will face a penalty fine ranging from $20-$100 each day you’re late, depending on your organization’s gross receipts. If you don’t file for three consecutive years, your organization will lose its tax-exempt status. Needless to say, these are two negative consequences that your organization would do well to avoid.
• Provides an opportunity to review your financial situation. The process of filling out Form 990 gives you the chance to closely assess your nonprofit's finances. Take the opportunity to consider your revenue streams. For example, are you positioned to grow your nonprofit sustainability well into the future? Assess the strengths and weaknesses of your budgeting practices and where there’s room for improvement.

As you can see, there are several benefits of filing Form 990 beyond the simple fact that you’re required to if you want to maintain your organization’s tax benefits. When your organization keeps its financial records organized all throughout the year to be prepared for tax season, you can always have a clear picture of where you stand financially.

What are the four main types of Form 990s for nonprofits?

There are four main variations of Form 990 that your organization may fill out, depending on your financial bracket. These forms are all intended to provide financial information to the IRS, but they differ in a few key areas. Let’s take a closer look at each form type:

Form 990-N

Also known as the 990 e-postcard, Form 990-N is the IRS’s electronic form for organizations with gross receipts of less than $50,000. It’s the quickest form to fill out because it’s only eight questions. Here are the eight things you’ll need to know to be able to fill out Form 990-N:

1. Your nonprofit’s Employer Identification Number (EIN), also known as your Taxpayer Identification Number (TIN)
2. The tax year
3. Your organization’s legal name and mailing address
4. Any other names your organization may use
5. The name and address of your principal officer
6. Your nonprofit’s website address, if you have one
7. Confirmation that your nonprofit’s annual gross receipts are less than $50,000
8. If applicable, a statement that your organization is going out of operation

That’s it! Form 990-N is only available online, so it’s helpful to file this form using electronic filing software (more on this later!).

Form 990-EZ

Form 990-EZ is for mid-sized organizations with annual gross receipts of under $200,000 and total assets under $500,000. This form is a step up from the simple Form 990-N, with four pages to fill out. According to File 990’s guide to the Form 990-EZ, you’ll need the same basic identification information required by Form 990-N, along with additional details such as:

• Your organization’s mission
• Activities you’ve completed
• Your revenues and expenses
• Your assets and liabilities

This form also asks for information about your organization’s officers, directors, trustees, and certain key employees. These questions are intended to provide transparency into employee and leadership salaries, benefits, and other compensation.

Form 990

The full Form 990 is for organizations with gross receipts that are equal to or greater than $200,000 and total assets equal to or greater than $500,000. This is the longest form to fill out and it requires the most in-depth information. However, the nature of the questions is fundamentally similar to Form 990-EZ, with inquiries into the organization’s activities, finances, employee compensation, and governance.

Form 990-PF

All private foundations, regardless of their size or financial status, are required to fill out Form 990-PF. If your organization is a nonexempt charitable trust or a tax-exempt private foundation, you will need to fill out this form. Form 990-PF asks for information about income, grants and gifts funded by the foundation, leadership compensation, and more.

So, how do you know which form to fill out? You’ll simply need to know your organization’s annual gross receipts and total assets. Keep an eye on your revenue to assess whether you’ll need to switch to a different form, such as from Form 990-N to 990-EZ.

Best practices for filing Form 990

Form 990 is due on the 15th day of the 5th month following the end of your organization's taxable year. So, if your organization’s fiscal year aligns with a calendar year, your deadline to file Form 990 is May 15. This applies to any type of Form 990 you’re submitting.

Don’t get caught unprepared each time you have to file your Form 990. Stay on track by incorporating these best practices for filing your form:

• Don’t procrastinate. It’s helpful to review your finances and put everything in order several weeks or even months ahead of your filing deadline. This ensures you won’t be caught by surprise and have to scramble at the last minute because of any incomplete, disorganized, or missing financial information.
• Use effective filing tools. Tax documents can often be overwhelming and confusing to fill out, especially if you’re filling out a longer form like Form 990. Form 990 software simplifies the filing process by completing most of the heavy lifting required to complete the form. Top software solutions will keep your data safe with heavy-duty security features, send reminders when it’s time to fill out the form each year, and keep track of all forms if your organization has multiple chapters.
• Work with an accountant when necessary. Many small and mid-sized nonprofits should be able to file Form 990 on their own with relative ease, especially when using dedicated software tools. But there may be some instances where you feel that your organization could use one-on-one assistance from an accounting professional to revamp your financial strategy or organize your finances ahead of tax season. If you have room in the budget, consider working with a nonprofit accounting firm. You may even have volunteers or donors who are trained CPAs and willing to help out.

Keeping these three tips in mind will help make your filing process stress-free and set you up for a more organized financial system all throughout the year.

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Now that you understand the differences between each type of Form 990, you can choose the right form for your organization and start organizing your finances to be prepared for tax season. Remember, if you need assistance at any point in the process, there are a variety of software solutions and nonprofit accounting resources available to help you. These tools and resources will help you make this year’s tax season the most pain-free yet.