Form 990:
State Tax Filings for California Nonprofits
Retaining a Nonprofit Law Attorney Can Help You Avoid Common Form 990 & Tax Filing Mistakes
Even an innocent mistake on Form 990 can lead to increased scrutiny by the IRS.
If the IRS suspects you or your tax preparer have miscategorized or misrepresented your revenue or expenses, they will review your returns–possibly going back several years–much more closely.
Most accountants are unfamiliar with the nuances of nonprofit taxes. Retaining a nonprofit attorney to help you file your 990s can help you avoid costly errors.
Common Nonprofit Tax Errors
Common mistakes on Form 990 by someone other than a nonprofit law attorney may include:
- Balance sheet ending net assets not agreeing with ending net assets reported elsewhere
- Miscategorized or missing board members, key employees, and other staff
- Answering questions that don’t actually apply to your organization
- Omitting business and family relationships
- Miscategorized expenses and salaries
- Incomplete compensation reporting and disclosures
- Completing the wrong schedules to accompany the Form
- Improper reporting of proceeds from fundraising
- Inappropriately reporting income as taxable unrelated business income (UBI)
- Failure to file an extension of time to file
Most small nonprofits, even if cleared of wrongdoing, cannot afford a costly audit that may follow an incorrect or incomplete Form 990.
Therefore, it’s important to get your organization’s taxes done right the first time.
Who Can See Your Nonprofit's Tax Filings?
Your Donors & The Public
By law, your three most recent Form 990s must be available for public inspection. Consequently, many donors – especially major donors – expect nonprofits to make their Form 990s available on their websites. (If you dont, you’ll have to send them manually via e-mail or mail in response to every single request.)
Nonprofit evaluation sites
Most potential donors recognize that they lack the knowledge, time, and ability to understand the strengths and weaknesses of any given nonprofit’s spending and fundraising patterns. They rely on sites like Charity Navigator and Guidestar to decide where to send their checks.
Opponents & Journalists
All nonprofits, especially those with political or disruptive goals, should ensure their taxes won’t create – or reveal – unflattering stories for their opposition. Even minor errors or omissions can fuel articles framing nonprofits for malicious noncompliance.