Which form to file: 990-N or 990-EZ?
When making a decision on which form to file with the IRS, you need to take into consideration the following:
1) Gross revenues of the organization for the past year;
2) The amount of the Assets;
3) Future plans for development of the non-profit organization.
Keeping Your 501c3 in Compliance
Once you've navigated the path to obtaining 501c3 status, there are important measures required to maintain your exemption with the Internal Revenue Service (IRS). This overview is a starting point in understanding how to remain in compliance.
Fundraising
Fundraising and applying for grants to support the functions of your organization are all within the rules of operation; however, all funding received must go toward the activities and programs of the organization or toward salaries for its employees.
Recordkeeping Part I – Organizational Records
When speaking about requirements for recordkeeping, nonprofits do differ from profit businesses. Each nonprofit organization should keep:
1. Organizational/Permanent Records
2. Financial Records.
In this article, we focus on the organizational/permanent records.
Organizational/Permanent Records: this includes all the paperwork that the organization should keep from the day of establishing the organization.
Recordkeeping Part II – Financial Records
Nonprofits should always maintain good financial records. Nonprofit organizations need financial statements for the following reasons:
- To prepare their annual tax returns with the IRS (form 990s);
- To report the financials to their members;
- To apply for grants;
- To write a Business/Strategic Plan;
- To evaluate the organization’s accomplishments; etc.
Based on the financial statements, the organization’s Board of Directors make educated decision on which tax return their organization is eligible to file with the IRS – f990-N, f990-EZ or f990s. The main financial statements are Profit & Loss Statement and a Balance Sheet. Most accounting softwares generate the financial statements for the reported period.
Recordkeeping Part III - Policies
Once you’ve become a nonprofit organization it is highly recommended that your Board of Directors adopt policies, in order to successfully manage the nonprofit activities. The Board of Directors’ decision on which policies to adopt should be based on the organization’s structure, size and type. Furthermore, nonprofit organizations that fail on adopting such policies have a greater chance of being audited by the IRS.
Some of the policies that your nonprofit organization may adopt include:
Nonprofit organizations can operate nationwide, even though they are legally registered in one specific state as a domestic entity. Generally, charities incorporate in the state either where their headquarters are located in or where the majority of their activities take place. As your 501c3 organization grows and evolves, a need to operate in more than one state might often arise.
Tips for Reporting Nonprofit’s Accomplishments on Form 990s
It’s a very common situation that nonprofits fail to properly report their yearly achievements on the annual tax returns they file with the IRS. Form 990-EZ and Form 990 ask for the organization’s mission and accomplishments.
A simple way of writing your nonprofit’s achievement is to follow the SMART rule, precisely:
Read more: Tips for Reporting Nonprofit’s Accomplishments on Form 990s
How to Change Board Members/Officers
Every Corporation is operated by the Board of Directors according to its bylaws. Some states require one person to serve on the Board, some states – as many as five. The Board members and shareholders must follow the rules set forth in bylaws in order to change directors/officers.
Below is a list of 7 steps to take when changing Board members/Officers:
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