Form 990 for first-time board treasurers

Most board treasurers come to the role from somewhere else: a finance job, a small business, or a willingness to keep the books when nobody else would. The annual information return is usually the first unfamiliar task. It is also public, which gives it a different weight from a business tax return.

Which form applies

Most tax-exempt organizations file one of three versions each year, based on gross receipts and total assets:

Private foundations file Form 990-PF instead, and some organizations, such as churches, are not required to file. "Normally" in the 990-N test is a defined term based on an average of recent years, so a single strong fundraising year does not always move an organization up. The Form 990 instructions explain the calculation.

When it is due

The return is due by the 15th day of the fifth month after the organization's year ends. For a calendar-year organization, that is May 15. If the date falls on a weekend or a legal holiday, it moves to the next business day. Form 8868 gives an automatic six-month extension, which moves a May 15 due date to November 15.

Form 990 is filed electronically. An organization that is required to e-file and sends paper is treated as having failed to file.

The deadline carries a larger consequence than most. An organization that fails to file a required return or e-Postcard for three consecutive years loses its tax-exempt status automatically, on the due date of the third return. Reinstatement is possible but takes an application. If you inherit an organization and cannot find the last few filings, check its status first.

What the board is asked

Form 990 asks several governance questions in Part VI. Two of them involve the treasurer directly.

• Line 11a asks whether a complete copy of the final return was provided to every voting member of the governing body before it was filed. Telling the board a copy is available on request does not count.

• Line 11b asks you to describe on Schedule O the process, if any, the board or management used to review the return.

The same part asks whether the organization has a written conflict of interest policy. Federal tax law does not require these practices, but the answers are public, and donors and grantmakers can read them.

We suggest a simple routine: circulate the final return to the full board two weeks before the filing date, ask for questions by a set day, and record the review in the minutes.

What becomes public

The organization must make its Form 990 available for public inspection for three years from the date it is due, including extensions, or from the date it is filed, whichever is later. Schedule B, which lists major contributors, is filed with the IRS, but most organizations do not have to make contributor names and addresses public.

Because the return is public, it should never include social security numbers. With limited exceptions, neither the organization nor the IRS can remove them before the return is made public.

What the books need to support

Form 990 asks for more than a profit and loss statement. The treasurer's year goes more smoothly if the books track these items from the first month:

• Functional expenses. Form 990 filers report expenses by function: program services, management and general, and fundraising. Allocate shared costs such as rent and salaries on a written, consistent basis.

• Restricted gifts. Record donor restrictions when the gift arrives, and release them when the organization meets the restriction.

• Compensation. Officers, directors and key employees are listed with their compensation. Keep W-2 and 1099 records organized by person.

• Related parties. Business dealings with board members or their families may need to be disclosed. Ask each board member to complete an annual questionnaire.

State filings

Many states require a separate annual report for charities, often with a copy of Form 990 attached, and some require audited or reviewed financial statements above a revenue level. Check the rules in each state where the organization is registered to solicit donations. The state deadline may differ from the federal one.

A first-year checklist

1. Confirm the organization's exempt status and find the last three returns.

2. Note the year-end, the due date and whether an extension is usual.

3. Agree the functional allocation method with your preparer.

4. Send the annual conflict of interest questionnaire.

5. Schedule the board review before the filing date.