Form 990: Checklist of Required Schedules, Page 4February 08, 2021
Nonprofit organizations, here’s what you need to know as you’re completing Pages 3 and 4, Part IV of Your Form 990.
*Editor's Note: This blog has been updated as of February 8, 2021 for accuracy and comprehensiveness.
In part four of our 990 blog series, we dive into the checklist of required schedules. Here’s what you need to know when determining which schedules you are required to attach to your 990.
What are schedules?
Nonprofits are subject to a variety of disclosure and compliance requirements through various schedules which are attached to the form 990.
The core Form 990 comprises only 12 pages of information, there are several potential schedules that must be attached potentially increasing the total to 30+ pages. Beginning on page 3 (Part IV) there are 38 “yes/no” questions. The answers to these questions will determine whether your organization must attach another schedule with additional information.
What is the penalty of perjury?
Keep in mind when answering these questions that the person who signs the Form 990 (an officer of the organization) does so under “penalty of perjury.” Guessing at the answers or simply keeping the same as last year response is not recommended. In our second blog we discuss what it means to sign a document under penalty of perjury. The answers to some questions inform the IRS of situations that they would not have known about in the past, unless they audited the organization. This section asks the organizations to self-identify if they have engaged in various activities.
Pay attention to question 3
A great example of this is question 3. This question asks if the organization engaged in any direct or indirect political campaign activities on behalf of or in opposition to candidates for public office. This is a very sensitive topic, one we cover in-depth in our white paper titled Political Campaign Activity and Lobbying Activity for a 501(c)(3) Organization. Involvement in political campaign activity is strictly forbidden and involvement may result in the loss of your tax-exempt status. Obviously a “yes” answer here and the additional information that must be reported on Schedule C relative to this transaction is likely a red flag to the IRS.
What do the other questions entail?
Not every question has such disastrous consequences or the potential for a loss of tax-exempt status. Most questions ask about activities that the IRS has a special interest in learning more about. For example, question 6 asks about donor advised funds including if the organization maintains any donor advised funds. If you respond “Yes” to this question additional information about the administration of these funds is then required to be reported in Schedule D.
In addition to donor advised funds there is additional information requested if your organization holds conservation easements, maintains collections, or works of art or historical treasurers, serves as a custodian for accounts, has an endowment fund, has investments, land, or buildings (just to name a few).
Question #12a asks if the organization was audited, while you might think that a “no” answer to this question is not a good answer, remember, audits are not required by the IRS. The reason why the IRS asks questions such as this is to obtain a profile of the policies and procedures under which the reporting organization is operating. Even though the IRS (and most resource providers) believe that it is a best practice to have annual audit, a “no” answer is acceptable, but answering “yes” to this question is preferable.
If you are responding yes to these questions it should alert you that there are some specific regulations surrounding the question’s subject matter. Reading and understanding the IRS code is not a small undertaking so we always suggest consulting a CPA focused on serving nonprofit organizations about the laws and to ensure you are in compliance.