For accountants, springtime typically means one thing – tax season. Normally, individual income tax returns are due in April. But this year, due to COVID-19, the IRS has extended the filing deadline for individual income tax returns to May 17, 2021. This means your individual income taxes will be due on the same day as your nonprofit organization’s Form 990. With only one month left until this double deadline, there’s no time to waste.
The Form 990 filing deadline for not-for-profit organizations is the 15th day of the 5th month following the end of the organization’s fiscal year. For organizations that operate on a calendar year, this means your Form 990 is normally due on May 15. (Since the 15th falls on a Saturday this year, the deadline is actually the following business day – Monday, May 17.) If your fiscal year ends on June 30, your Form 990 would be due on November 15.
Since most nonprofit organizations operate on a calendar-year basis, you are likely wrapping up your Form 990 right now – or maybe you’re just beginning to panic about it! While the preparation of your Form 990 is often best left to a CPA or accounting professional, there are many things that your organization can do to get ready for your Form 990 and help things go more smoothly for your tax preparer.
Reconcile your bank, credit card and investment accounts. To do this you will need to retrieve statements from your bank(s) that clearly show the opening balance, ending balance, and all transactions and activity that occurred in that account during a given period. Once you have the statements in hand you will want to make sure that your accounting records reflect the exact activity that is appearing on the statements from your financial intuitions.
Pull an Accounts Receivable report and an Accounts Payable report and compare these reports to the respective accounts on your Statement of Financial Position (balance sheet). If the AR or the AP report totals do not match your Statement of Financial Position, you will need to do some research to find out why. Small discrepancies are often due to timing difference (i.e., a bill payment that is dated before the actual bill) but larger discrepancies may signal problems within your accounting system. These problems will need to be corrected before your tax preparer can file your Form 990.
Review your fixed asset listing from the previous year, and make a note of any new assets or items that have been disposed of. Some organizations have a capitalization policy or a dollar amount above which an item might be considered an asset. For example, a $100 printer would likely just be expensed, but a $2,000 computer could be considered an asset. Examples of disposals would be old office equipment or machinery (like computers or vehicles) that were sold or thrown away. If the equipment was sold, make a note of how much it was sold for. For all disposals and additions note what month the item(s) were disposed/added. This will help your accountant maintain your organization’s fixed asset schedule.
Gather all your grant documentation and review what portions of these funds are still available to be used in the future. For example, if your nonprofit was awarded a restricted grant of $20,000 in 2020 but only $10,000 of those funds were utilized during 2020, then you will want to note that $10,000 of restricted funds are still available for use during 2021.
There are many other things you can do to get your organization ready for 990 filing, but these tasks are a great place to start. This will help your tax preparer move quickly through preparing your Form 990. If you have a short timeline for getting your Form 990 prepared and filed, you will want to make sure that the information you’re providing to your accountant is 100% accurate and complete. This will prevent delays and help your organization avoid late fees or penalties from the IRS.