Nonprofit leaders often wear many hats – fundraiser, operation manager, human resources, volunteer coordinator, public relations, donor relations, mission advocate, and more. But when it comes to your Form 990, hiring a qualified tax accountant is one of the most prudent investments a nonprofit can make.
Some nonprofits assume that because they are tax-exempt, tax reporting should be relatively straightforward. In reality, IRS informational returns for nonprofits are far more complex than it may first appear. Even determining which form to file can be confusing:
Form 990 is the standard annual informational return for most (but not all) nonprofits.
Form 990-EZ is a shorter version for smaller qualifying organizations.
Form 990-PF applies to private foundations.
Form 990-T is a separate form that may be required in addition to your 990/990-EZ/990-PF to report unrelated business income.
Other IRS forms, such as the Report of Foreign Bank and Financial Accounts (FBAR), may also be required depending on your organization’s financial activities.
Each form includes detailed financial disclosures, governance reporting, compensation information, public support calculations, and compliance questions. A tax accountant understands how to classify revenue, allocate expenses, report restricted funds, and properly complete schedules that may otherwise be overlooked.
Even a small error on your Form 990 can create significant consequences for your organization. Incomplete filings, inaccurate reporting, or missed schedules can trigger penalties and IRS inquiries, or even jeopardize your tax-exempt status. An experienced tax accountant can help reduce these risks by ensuring your financial statements align with reported tax information and that all required schedules and disclosures are completed.
Specialized knowledge is particularly important for nonprofits that generate income through advertising, rentals, merchandise sales, sponsorships, or other activities that may or may not be taxable. This is known as unrelated business taxable income (UBTI). A tax accountant who specializes in nonprofits has the skill to ensure your organization correctly reports this income without paying any more taxes than necessary.
Private foundations may also find value in hiring a tax accountant, especially for organizations that manage sizable assets. Private foundations operate under stricter reporting obligations than public charities, and their returns may require disclosures involving investment income, grants paid, charitable distributions, excise taxes, and self-dealing concerns.
How Much Does It Cost?
The cost for a tax accountant to prepare and file a standard Form 990 can range from $1,500 - $4,000 depending on your organization’s financial activities, the quality of your bookkeeping, and the skill of your accountant. In general, Form 990-EZs usually cost less, and Form 990-PFs usually cost more. A Form 990-T may or may not incur an additional fee, depending on the complexity and volume of your unrelated business income.
To estimate the cost for your organization, click here to access our free Form 990 quote calculator. Just answer a few simple questions about your nonprofit to generate an instant price quote.
What About Form 990-N?
If your nonprofit qualifies for the Form 990-N, there’s usually no need to hire a tax accountant. For very small nonprofits, the Form 990-N (e-Postcard) can easily be filed online for free. You’ll simply enter a few basic details about your organization – legal name, address, employer identification number, fiscal year, and other contact information – and certify that your annual gross receipts are $50,000 or less.
However, it’s important to ensure your nonprofit is eligible to file Form 990-N. Some organizations (such as private foundations) are never eligible for the 990-N. And you don’t want to be caught by surprise if your income suddenly increases or your organization no longer meets the qualifications for the 990-N. If you have any questions about your eligibility or anticipate growing beyond the $50,000 threshold, it’s a good idea to establish a relationship with a nonprofit tax accountant sooner rather than later.
