Demystifying IRS Form 990-N: What Nonprofits Should Know (2024)

Each year, nonprofits are required to file Form 990 with the IRS. This proves that you’re being compliant with the rules and regulations needed to maintain your 501(c)(3) status.

There are five different options when it comes to filing Form 990 as a nonprofit, and the smallest nonprofits use the 990 N form. In this article, we’ll cover what Form 990-N is, why it’s important, how to file, best practices for filing, and common mistakes to avoid.

If you’re ready to get started, let’s jump in!

End-of-year tax reporting can be stressful, especially when you’re just starting out. We’re here to help by explaining everything you need to know about Form 990-N and how to fill it out.

What Is Form 990-N?

As we mentioned before, every nonprofit is required to file Form 990 each year with the IRS. There are different types of Form 990, and a Form 990-N is just one kind of these forms.

Form 990-N is an electronic form that’s filed by small tax-exempt organizations that aren’t required to file the standard Form 990 because of their size.

The 990 N form only asks for eight pieces of information, including:

• Employer identification number (EIN)
• Tax year
• Legal name and mailing address
• Other names
• Name and address of principal officer
• Website
• Confirmation that the organization’s annual gross receipts are less than $50,000
• Statement of termination (if applicable)

Ultimately, this form is used to determine if you are adhering to the regulations in place for tax-exempt organizations. Failure to file this document properly could result in a loss of tax-exempt status, which would be devastating for any nonprofit organization.

Who Is Required to File Form 990-N?

All nonprofits have to file a Form 990 annually, though there are various iterations that cater to specific types of nonprofits. Small tax-exempt organizations whose gross receipts are $50,000 or less are required to file a 990 N Form, which is a shorter and easier version.

Your gross receipts are the total amount of money that you receive in a year. That includes everything—all donations, grants, and other sources of earned income—without subtracting any of the operating costs or expenses it costs to run the nonprofit.

In general, you should file Form 990-N if:

• You were founded within the last year and have received $75,000 or less in pledged gifts during the first year.
• You are one to three years old but have an average of $60,000 or less in gross receipts during your first two taxable years.
• You are three or more years old but have averaged $50,000 or less in the last three taxable years. This can include the current year.

Organizations could choose to file a different Form-990 if they prefer; however, the Form 990-N is the most streamlined option. It’s the easiest to fill out and does not require paper submission.

Even if you meet one of the above criteria, there are some exceptions.

Private foundations, select religious organizations, political organizations, and more are not eligible to file the 990-N form. You should contact a tax professional if you have any questions about which form to file for your organization.

When Is Form 990-N Due?

The deadline for the 990 N form may vary from organization to organization. It depends on when the end of your tax year is, but the form should be filed by the 15th day of the 5th month following the end of your tax year.

For example, if the end of your fiscal year is Dec. 31, then you should file your form no later than May 15. While there are no tax penalties if you file this document late, you could face other difficulties if you do not file, including a loss of tax-exempt status.

Form 990-N is a critical document that not only helps you maintain your tax-exempt status but also stay accountable for using your resources responsibly.

Here’s more about why Form 990-N is so important.

Role of 990-N Form in Nonprofit Transparency

The 990 N Form is a publicly available document that details a nonprofit organization’s revenue and expenses, providing a comprehensive overview of how the organization uses its funds—including its activities, governance, how it pays its employees, and more.

This transparency can help establish trust in your organization, allowing people to know you are a nonprofit that is fiscally responsible.

This high level of transparency also discourages the misuse of funds because you have to be publicly accountable at the end of each year.

Impact of 990-N Form on Donors and Funders

Essentially, every dollar a nonprofit receives should be reflected in this form, which provides the ultimate peace of mind for anyone wanting to make sure their donations are used responsibly.

Potential donors and funders can look up your past 990s to see how well and responsibly you manage your funds. Depending on what they see, that could significantly impact whether they decide to support your organization.

Additionally, nonprofits can also use other organizations’ 990s to their advantage. You can look up similar organizations to see who funds them and research those grant opportunities. Because your nonprofits are similar, you could have a good chance of securing the same funding—and Instrumentl can help you do this with their easy-to-use 990 finder tool.

How Governments Use 990-N Form For Nonprofit Oversight

Just because you were granted tax-exempt status doesn’t mean that you will have it in perpetuity. Your operations must qualify each year for tax-exempt status, and the government uses Form 990 to prove that.

For example, you should be reinvesting a majority of your revenue into making a difference.

Ultimately, Form 990-N proves you are in compliance with IRS regulations to keep your 501(c)(3) status.

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Form 990-N includes identifying information that’s unique to you and your organization. There aren’t as many fields as some of the more detailed 990 forms; however, that doesn’t mean you don’t still need to fill it out carefully.

Here’s a step-by-step breakdown of each section and what you have to put into it.

Section A: Please enter the employer identification number. This is your federal tax ID that is used to identify your organization. It is unique to you.
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Section B: Enter the tax year dates for your organization, including the beginning and end. This helps identify the period for which you are filing financial information.‍

Section C: Please check if your nonprofit has been terminated, out of business, or if the gross receipts are normally $50,000 or less. If the organization has been terminated, you no longer need to file after the last year. If your gross is more than $50,000-$75,000, depending on how long you’ve operated, you will need to file a different form.
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Section D: Please enter the name of the organization and its address. This helps ensure all formal documentation is sent to the right place.
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Section E: Please enter the website (if applicable) of your organization. This is another identifying piece of information; however, not all organizations have a website, so you can leave this blank or enter N/A.

Section F: Please enter the name and address of the principal officer of your organization. This information tracks who is in charge of the organization, so please add the highest-ranking officer’s information here.

You also need to include documentation to prove that your organization’s annual gross revenue is less than $50,000. Depending on how long your organization has been in operation, this could be for the last one to three years.

If the organization is terminating or terminated, you need to provide a statement explaining why it is going out of business.

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It is fairly easy to file Form 990-N, especially because you can only file it electronically. Once you have all the information gathered, you simply have to follow three easy steps.

1. Log into your account online. You can do this through your current IRS user name or existing ID.me account. If you do not have one, you will need to create a new ID.me account.
2. Locate the Form 990-N and fill it out with the information outlined above.
3. Submit the form electronically before the filing due date.

Form 990s are listed on the state’s secretary of state or attorney general’s office once they are accepted, as these are publicly available documentation.

Eligibility to file 990-N Form

Nonprofits who make less than $50,000 in gross receipts in a tax year are eligible to file the 990 N form.

This should be the total amount of revenue without taking into account any expenditures. Organizations that are less than a year old could receive up to $75,000 and still be eligible to file, while organizations that are between one and three years old can average $60,000 or less and still file.

There are select exceptions to this rule, so it’s always best to consult with a tax professional to ensure you qualify.

Online filing of 990-N Form

Form 990 N is very convenient to file, but you must use a computer or laptop to do it.

Do not use a smartphone or tablet, as it will not work. Log into your account using the same email address associated with your account. You can also click here to submit directly from the IRS website.

Deadline for filing 990-N Form

You must file your form 990 n by the 15th day of the 5th month after your tax year. Your tax year must be over before you are able to file. You can file before this deadline at any time as long as the tax year is over.

Consequences of failing to file 990-N Form

There are no penalties associated with filing a Form 990 N late; however, you will receive reminders to file. You cannot file the following year’s form until the current year’s has been filed.

If you do not file the form for three years in a row, you will automatically lose your tax-exempt status.

Correction of Errors on the 990-N Form

Unfortunately, you cannot amend Form 990-N after it has been submitted. You can update your information with the following year’s form. If your form was rejected because of the error, you can check the submission ID for more information on why and resubmit.

As you consider filing your 990-N form, here are some best practices to keep in mind.

Preparing the Necessary Information

Before you even get to the form, gather all the information you will need to make the application process seamless. This includes the name, EIN, and annual gross receipts that prove your organization makes less than $50,000. Having this available will help streamline the process.

Checking for Accuracy

Before you hit submit, make sure to proofread the application. This step will ensure that your form is accepted the first time. If there are mistakes in the form, others may not be able to find it, which could cause issues when you’re trying to find funding.

Remember donors often try to locate 990s to see how organizations are using funds. If they can’t find you, they can’t verify your details. It may appear dishonest or sloppy to potential funders, sending the wrong picture of your organization.

Ensuring Timely Submission

While there are no penalties for failing to file your form by the deadline, it’s still best practice to do so. This will ensure you are compliant and prove to potential funders that you can stick to deadlines.

Keeping a Copy for Record-keeping

After you file, make sure to print the form on the confirmation page. This is the only time you will be able to print the form you submit. If you do not print it, you will have to wait for the form to be accepted and print it from the Tax Exempt Organization Search.

Now that you know what information is needed, how to file, and best practices, here are some common mistakes to avoid when filing form 990-N.

Filing with Incorrect Information

Make sure your information is accurate and up to date. Organizations can sometimes file with incorrect information if they are not careful. If the form is accepted with this information, these errors are part of your organization’s permanent tax record for potential donors and funders to see.

Late Filing

While there are no penalties, filing late is another mistake to avoid. You should have all your documentation ready to go well before the deadline. If you’re late, potential donors or funders may not trust that you will deliver on your promises for them too.

Not Filing at All

If you fail to file your Form 990-N for three years in a row, you will automatically lose your tax-exempt status. The IRS will send you many notifications in the mail, so make sure you don’t ignore these communications.

Incorrect Calculation of Gross Receipts

Because there are five different types of Form 990, it’s essential that you make sure to file the right one.

If you incorrectly calculate your gross receipts, you could get your tax filing rejected. It could also disqualify you from tax-exempt status in serious cases, so it’s critical to be careful when doing your calculations. You can seek the help of a nonprofit tax professional if you have questions.

Form 990-N is an electronic tax document that you need to file each year to demonstrate you still qualify for tax-exempt status. It is a streamlined version for smaller nonprofits to use if they gross less than $50,000 in a year.

Failure to file this form could lead to a loss of status, so make sure to file at the end of your tax year. Once you break it down, the IRS Form 990-N isn’t that scary after all!

For more nonprofit tips, resources, and guides, check out Instrumentl’s blog.