990 reminders for preparing your own 990

Form 990 must be filed by a tax-exempt organization if it has gross receipts greater than or equal to $200,000 OR total assets greater than or equal to $500,000 at the end of the tax year (with a few exceptions).

Many organizations on the lower end of the $200,000 to $500,000 revenue range choose to prepare their 990 in-house. I understand the economies of that. I’ve reviewed 990’s prepared by members of their own organization and the new 990 form can be confusing at times. Here are some hints that I hope will be helpful in preparing your 990 in-house, if you choose to do so.

Part XII: Accounting method. If you utilize receivables or accounts payable in your books and records then I recommend you file your 990 on the accrual basis of accounting. Some nonprofits recognize revenue, especially contributions and grants, when the funds are committed by the donor. They also accrue expenses as they are incurred. There is no real benefit to file the 990 on the cash basis if you use the accrual basis on your books and records. The instructions say to file the 990 based on the accounting method you utilize for your books and records, so unless you actually keep your accounting records on the cash basis and don’t record receivables or accrue expenses, I recommend you file the 990 on the accrual basis

When you look at Part VIII, Statement of Revenue and Part IX, Statement of Functional Expenses, this is where I see the most discrepancies. These sections are designed so the amounts to the right of the “Total” column are entered and they sum into the “Total” column. Most professional tax software does this automatically, but if you prepare forms online I don’t believe they do. I’ve seen 990’s that have amounts in columns B, C and D that don’t flow into the totals in column A or totals in column A that are not entered in columns B, C and D.

Part III asks for the Revenue and Expenses of your three largest program services with a description of each service. The “Other program services” should be utilized to add the total Expenses and Revenue of all other program services other than the three largest. This way, the Total Program Service Expenses at the bottom of Part III will equal the Total Program Service Expenses from Part IX. In professional tax software, you get an error message if these two items don’t agree. I’ve seen Part III used to fill in the amounts for the three largest program services and then the bottom remain blank on fill-in forms.

If you make sure the totals on page 1 equal the totals in the “Part” referenced next to the line item on page 1, it will help minimize errors in preparation of the return. If you’ll check each part to see where else those numbers flow from or to, that will also help minimize errors or omissions. Chances are if it says “Total”, it probably flows through the 990 in more than one “Part”. Taking time to check the different parts of the form that contain totals to verify totals in related parts of the 990 match will help you minimize errors and omissions on the return.