Why it matters

Sometimes nonprofits think of form 990 as simply a compliance exercise. In reality, Form 990 is one of the most visible documents your organization produces. Regulators, donors, watchdog groups, and the general public all rely on it to understand how your nonprofit operates. As reporting requirements evolve, organizations that are proactive will be better positioned to avoid last-minute scrambles, reduce compliance risk, and present a clear, consistent story about their mission and impact. In short, getting ahead of these changes isn’t just about staying compliant, but building trust. 

What is the goal of the 990 update?

The Treasury Department and IRS have indicated an interest in enhancing Form 990 to improve visibility into nonprofit operations. Based on these signals, potential areas of focus may include:

• Greater clarity around sources of revenue, including complex or layered funding arrangements
• Enhanced transparency in governance, oversight, and related-party transactions
• Improved consistency in how information is reported across organizations
• Strengthened ability to identify noncompliance or irregularities

How should my nonprofit plan for these changes now?

These are safe to do now, regardless of final IRS language:

For large public charities:

• Start by taking a fresh look at your revenue streams. Do you have a clear inventory of where funding comes from, and how complex each source is (restricted gifts, pass-through funds, related-party transactions)?
• Compare what’s in your audited financial statements to what you’re currently saying in your Form 990. If there are gaps or inconsistencies, now’s the time to align the story.
• Get ahead of governance disclosures by drafting narratives that assume tougher, more detailed questions. Think of it as pressure-testing how your policies and oversight would read to an outsider. 

For smaller filers:

• Consider whether your revenue coding and donor classifications are as clean and consistent as they could be. Simplifying this now will make future reporting much easier.
• Put your governance practices in writing, even if they already exist informally. A short, straightforward memo documenting policies can go a long way.
• Take another look at Schedule R and ask yourself: if someone unfamiliar with your organization reviewed this, would they fully understand your relationships and transactions, even the small ones?  Is the Schedule R presented clearly and comprehensively?

What’s next?

While the IRS has signaled its intent to revise Form 990, specific changes and timelines are still developing. In the coming months, nonprofits should keep an eye out for proposed updates, draft forms, and opportunities to provide public comment. Internally, this is a good time to engage your finance team, auditors, and advisors to assess readiness and identify any gaps in current reporting.

Organizations that stay informed and take incremental steps now will be in a much stronger position when the final requirements are released without the need for a last-minute scramble.