Preparing Form 990 and State Tax Filings for California Nonprofits

Most nonprofits must report their financial information to the IRS on Form 990 once a year. Retaining a nonprofit attorney to help you file is advantageous for several reasons.

Common Form 990 Mistakes Lead to IRS Fines and Audits

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.

Common mistakes on Form 990 by someone other than a nonprofit law attorneys 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. It’s important to get your organization’s taxes done right.

Think you know Form 990? Take the quiz!

(Information in quiz should not be taken as legal advice. All situations are different and require individual analysis.)

Did We Mention State Tax Forms?

In addition to your IRS Form 990 filings, your organization likely has obligations to file tax returns with the state of California as well.

Make sure you retain a nonprofit law attorney versed in the nuances of the applicable state laws. It’s easy to end up submitting unneeded state tax forms, all of which are publicly available.

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Your Tax Returns Are Available to the Public

Your nonprofit’s Form 990 will not just be reviewed by the IRS. It will be reviewed by:

  • The public at large
  • Your donors
  • Nonprofit evaluation sites, such as Charity Navigator and Guidestar
  • Journalists
  • Your organization’s opponents

With the scrutiny that comes with having tax-exempt status, it’s best that your organization’s taxes be done right.

The IRS even requires that nonprofits make their three most recent Form 990s available for public inspection. Consequently, many nonprofits make their Form 990s available on their websites in order to avoid manually sending it via e-mail or mail in response to every single request.

Charity Evaluation Websites Will Use Form 990 to Rate You

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. Make sure your Form 990 is done correctly to receive a fair rating from the charity watchdogs.

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Tuple Can Prepare and File Your Form 990

Whether it’s your nonprofit’s first Form 990 or its fiftieth, Tuple can help. Tuple provides comprehensive assistance with Form 990 and nonprofit taxes.

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