Tuesday March 24, 2020
Any accounting, business or tax advice in this here podcast is not intended as a thorough in depth analysis of your specific issues. It's not a substitute for a formal opinion. It is not good enough to avoid tax related penalties. Got to tell you this because don't want y'all coming for me, back to the episode. Hey, welcome back is another episode of the nonprofit nuggets podcast and we are talking about 990s again. In case you did not hear last episode. The 990 is the IRS form for an informational return for nonprofits. This season. I want you to get a better understanding of the return and how it fits into the foundational pieces for a healthy nonprofit.
Those pieces being your mission, your priorities, your tools and storytelling. For that reason. This season is brought to you by my DIY clinic, which is going to be on April 21st, 2020 at 9:00 AM mountain. This is for you if you are considering following your own 990 for your organization, but you want to access to a CPA who could answer some questions while you work on the farm. This is also for you if you're wanting to set aside a block of time, 90 minutes to work on the form so that you can continue your work in the community. So check out the link in our transcripts to learn more on to today's. Excellent. All right, so today I want to talk all about the mission. The IRS wants you to be great. I know when you're doing like your personal return, it doesn't feel like that. I feel like they're like out to get me, but when I'm doing it for a client for their 990 I genuinely feel like, Oh yeah, like the IRS is trying to make this easier.
They're wanting to make sure that at least at the very, at the very least, your organization is saying we exist for what we started out for. For that reason, on the return it ask like what is your mission? It is upfront. It is not the first question, but it is within that first half of that page of questions, at least if you're filing electronically. Um, and it is one of the reasons for that is because the IRS grants you your tax exemption based off what you say your mission is. So if you say your mission is taking care of cats and all you stay see in your activities and your accomplishments, is that you, you've been adding some dogs and Guinea pigs and some horses. It's not really, it's not really adding up. Another reason why I think the 990 is a great tool to expand on your mission is that transition year between moving from a 990N, that's that informational postcard where you're just saying, yes, we still exist for our mission to filing an EZ and beyond where you're saying, no, this is what our mission is and this is your time to reach, to do a gut check to say this is what we started off with. Is that still what we're doing? Another thing with the IRS when you're talking about your mission is are you a public charity? So in the first episode are a general overview of this seat of the 990 I mentioned the Schedule A. So schedule A is where they talk about public support.
Yeah. They want to make sure if you say you are a charity and you say that you want to do good in the community, how is that actually playing out? Is the community buying into what you're selling? Um, and this comes into play when they're saying, hey, at least a third of our support is coming from donors and you have a wide, this is just saying you have a wide donor base. You're not a private foundation. You're not just getting it from one or two people who are going to try to have like a lot of control. Those are private foundations. You're saying we have a wide pool of people. People all over are giving us money specifically for this cause sometimes though that's not the case. Sometimes you don't have a wide area support. This can come into play because you may start doing a fee for service.
You may start having um, some other sales, some not, some taxable revenue and it may get to the point where you're like, Ooh, we're dropping below that one third Mark. Are we truly a public charity? There is a test. Um, there is facts and circumstances you can say you have to consider, are we usually getting that public support? And this is a really good reason why you have to be in tune with your mission and how is it being perceived by others. If you are inconsistent with your mission, if you're saying if your mission changes with your audience, then it's going to be hard to get that public support. And so consistently is your mission the same. And not saying that you can't change a couple of words, but at its core, are you doing what you've set out to when your organization started? Did, are still doing that?
Do you need to revise? You can tell the IRS, hey, our mission is changing. Um, cause there's nothing wrong with that. But those things, your mission is why the public is going to give you money. So I think the 990 is a great time for you to get a gut check to see, hey, are we still in alignment? Okay. Or are we, are we not? Are we, um, are we not in alignment anymore? Do we need to revise our mission? Is the community not understanding our mission? This will give you a good gage to say, whoo, we're dropping or were rising in terms of the public support. Um, the other thing in the test is, are you continuously soliciting? So it's not just, Oh, on occasionally asks for money. But are you continuously saying, Hey, we need money?
Do you have a something on your website? Are you doing fundraising events? Are you actively pursuing donors? Another test to see, okay, you write people low that third, but you are still actively pursuing. Um, do you have a diverse donor base? So are lots of different people giving you money. And lastly, and this is why most organizations will still have their status, even if they are falling below that one third threshold is you are impacting a large population. So that's why you can't, that's why you have to be very intentional about your mission and the work that is you're setting out to do. Because if you're saying, well, we only help green-eyed red haired people in the state of Nebraska who lives in Salina who have a grade point average or 4.7, that gets to specifics, that is not a broad enough category of people.
Maybe it is. I didn't seem like it. I used to live in Nebraska, so it's the lineup. Um, I didn't see that many people. I didn't really stop very often. But if you're saying like, Oh, we only impact this small population, that gets to be a harder, um, a harder requirement. And it's not because you're saying we only had help red heads or green eyes. It's all of those layered components that you've narrowed it down so that you can't really tell how you, how are you helping a general population? How are you helping a large number of people if you have so many requirements before you can help or assist. So those are the things that you want to keep in mind. Um, when you are trying to think about are we still in line with our mission? Think about what are you communicating to general public?
Think about are you actively looking for donations? Who is donating to you and who are you serving? Like how big, how wide is the pool of the people that donate to you and who you serve? One thing I wanted to mention here because I didn't mention it last time, but I do want you guys to think about it is one of the reasons why nonprofits lose their tax exempt status. The easiest way to lose your tax exempt status is failure to file your 990. If you do not file your 990, that includes your postcard for three years, you would automatically lose your status because you have not told the IRS we still exist. We still are following our mission. And so they will automatically revoke your status. There are other penalties you could in fact have intended to file, um, and ended up, you know, you missed the deadline but you did file.
There are late penalties and there are also penalties for if you got a notice and said, Hey, you filed, this was incorrect. Can you submit the updated information. If you get that new date, a new due date and you don't submit, the IRS will fine you and they can fine the person. The person who was responsible for filing the form will end up getting fine. So there is, or the organization can be fined for failing to file. The person can be fined for missing that new due date. And if you just don't file at all, you can face automatic revocation. So keep that in mind when you're wondering is it worth it? Yes. If you went through all the trouble of saying we want to be a tax exempt organization, it is always worth it to file your return. File it on time or file an extension and then file that return on time and always be sure that you are staying in alignment with your mission.
Hope this helps. Hope you feel better equipped to handle the IRS form 990 and knowing how it fits into your mission. It is really just a time for you to gut check and say, we are meeting what we set out to do. We are getting the support from the public and we are supporting the community that we said we would. If you have questions, comments, or concern send me a message.