Bragging on Your Nonprofit with a 990

Thursday February 10, 2022 comments

Any accounting business and tax advice contained in this here podcast is not intended as a thorough, in depth analysis of specific issues, nor is it a substitute for forming information, nor is it sufficient to avoid tax-related penalties. If you have specific questions that you need advice for, be sure to schedule a strategy session and not solely rely on information in this podcast. Hi, so I have recognized that a lot of nonprofit leaders are really uncomfortable talking about money and that is one of the reasons why we started The Nonprofit Ace Podcast was to get more people to say, "Oh, I can do this. This is not that complicated."

I do recognize, though, that sometimes we need to go a step deeper, and so we are having a webinar. I know. It's a thing. So I am doing a webinar, so we actually dig into how good reporting, understanding your financials will actually lead to better fundraising outcomes, deepening your impact, serving your community more, all of those things. So definitely check out the show notes for the link to sign up. Bye. 

Hey, welcome to another episode of The Nonprofit Ace Podcast. I'm your host, Chyla Graham. I run CNRG Accounting Advisory. We are a virtual accounting firm based in Denver, Colorado supporting solely nonprofits, because I want nonprofit leaders to feel comfortable talking about money. All right. So today, as we think about this first quarter, I want you to think about all the financial pieces that sort of come together, not right now, but in the future and one of those is your IRS Form 990. The IRS Form 990 is an informational return.

It tells the IRS and the general public what your organization is doing, what programs you have, how much you're spending on those major programs, how much you're bringing in, what type of fundraisers you're having, how much you pay any key people. And the Form 990 is the only tax return where you get to brag on yourself, and I don't don't think enough nonprofits are really looking at that. As a small nonprofit, so think under $50,000, you have the option of completing an IRS Form 990-EZ. Oh, sorry. 990-N. That's a postcard. Super simple, definitely the route to go if you're like, "Our organization is actually pretty inactive. We want to keep our status though, and so until we get a more robust program, until we get some more funding, we just want to keep active." Complete a 990-N. My only tip for completing a 990-N is don't pay anyone to do it.

There are some websites, or at least one website that I found when I was looking into preparing the 990 yourself as a nonprofit, and they charge. The postcard should take you less than five minutes to complete. Do not pay anyone. Do not give any of your hard earned money to anyone to complete this 990-N, because it is literally asking you, "Who are you? Do you still exist? And did you bring in less than $50,000?" And if those are all the things you're going to do, listen here, do not pay those people. Okay. I was saying I want you to leverage this. And so for small organizations that are pretty inactive, yes, definitely go with the 990-N. If you're an active organization though, and you're like, "Hey, we do a lot of work, but we don't actually bring in a lot of money yet. Or we don't spend that much money right now," you want to do a 990-EZ.

So this is for organizations bringing in less than $200,000 of revenue. There's also some asset requirements, but I'll stick to revenue for now. If that is your organization, do the 990-EZ. Be able to say, "These are our programs. This is how much we spend. These are the things that are important that outsiders need to know." Why do I say to do that? Because in addition to some funders asking about your audit report or your audited financials, most of them are actually going to ask about your 990-EZ or your 990. They're not going to say, "Let me see your 990-EZ." They're going to say, "Let me see your 990." And so you want to have something to give them. And if you say, "Yes, we filed a 990," and you really just mean the 990-N, you have nothing to show them.

And so I want you to be set up for success. I want you to see these things actually lead to more funding. They're not just meant for the IRS being nosy. Yes. But it's meant to say, "Can we show what the work that we're doing in a standardized way?" Luckily though, the 990 does allow for you to say what your organization is specifically. So it's not purely a fill in the blank and just go with their numbers. You have the opportunity to say, "You want to know what we did this year? We fed this many people. We housed this many people. We tutored this many people." You can tell them what you did specifically. So that's really, it's one of the reasons I like the 990 is because of that. I don't like taxes. I do like the 990.

I don't like doing taxes. I do like preparing 990s though. And then the final option for if you're... Or not the final, but where most organizations, as you get larger, you fall into the regular 990. And so a regular 990 is saying, "Man, we had more than $200,000. Look at us." It is where the IRS is going to say, "Oh, did you now? We actually need a little more information." And so the more revenue you bring in, the more the IRS and the general public want to know about your work. And once you hit that $200,000 threshold, one of the things that they're going to start to ask you about is, "Tell me how you spent that money between administrative pieces, fundraising, and programmatic." And so I think it's really important for you right now to really think about, "Could we say that? Do we know how we spend those funds?"

And if you don't, really talk to your bookkeeper, your accountant, whoever is helping you manage that to think through how will you be able to divvy up that information because it's going to come. And if you build that habit in, now that you know how you spend your money, it doesn't come as a shock when you're doing your 990. The 990 will be confirming what you already knew, so that is the thing that I want you to do right now. Think about your 990. Which form is it that you're going to want to complete? What type of information do you want to put out there? Because that will play a part in how the public views you, how funders will view you, and you want to put the best foot forward. And so being fully prepared, being able to say, "We have this information, it is accurate. It is complete. We got our shine. We can tell people what we did," is going to be a game changer for many organizations.

And for you from a management standpoint, it's not really all about the funders. It's also about how are we managing things and how could we do better? The 990 will put things in a different view than you normally see it. And so it will give you another opportunity to say, "Have we thought about this closely enough?" All right. So if you are needing some support with your 990, definitely check out our show notes. We'll put in a list of things that you should start gathering, that way you have an idea of what you should have together, so that when you find your 990 preparer, you already have an idea. You can have a jump-start. You can get things to them early, get to them early, get to them early, and have a good, successful filing period. All right. Bye.

Thanks for listening to another episode of The Nonprofit Ace Podcast. Be sure to follow The Nonprofit Ace Podcast on your favorite podcast player so you never miss an episode. If you want to continue the conversation, follow me on Instagram. I'm @CNRGadvisory. I want to hear from you, so be sure to send me a DM if you have any questions that you want to get answered. And leave me a review on your favorite podcast player, be that Castbox, Google Play, Apple Podcast, or Spotify. Thanks for listening.

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