Top Ten Tips for E-filing Your Organization’s 990-PF

Most charitable and philanthropic organizations are required to file their tax returns electronically in 2021. In 2019 Congress passed the Taxpayer First Act (H.R. 3151), a comprehensive IRS reform bill. Among other provisions, the law mandated both the electronic filing of all nonprofit tax returns (including the 990 and the 990-PF) and the release of those forms—without charge—by the IRS in an open, machine readable format. Two years later, the law is being implemented, and understanding the law and the best way to navigate it can be beneficial for your organization.

Because open access and machine readability provide greater transparency, accurate and thoughtful reporting is more important than ever. 

First recommended by the Aspen Institute’s Program on Philanthropy and Social Innovation in a 2013 report, advocates of mandatory electronic filing also included Candid, the Urban Institute’s Center for Nonprofits & Philanthropy, the Lilly Family School of Philanthropy at Indiana University, the Johns Hopkins Center for Civil Society Studies, and the National Association of State Charity Officials among others.   

Their interest in more accessible tax returns has been both academic and practical. Both the 990 and the 990-PF are among the best sources of information on the nonprofit sectorAs Aspen has explained: “Form 990s contain vital details on the missions, governance and finances of America’s nonprofit organizations, which together account for over 10% of the country’s private sector employment and over 5% of GDP. Data on this robust and indispensable segment of American society is needed to grasp broad trends in nonprofit financial health, enhance donors’ trust, improve accountability and give nonprofits themselves helpful facts to inform strategy and development.”

Drawn from a presentation by the always-popular Tom Blaney of the accounting firm PKF O’Connor Davies at the Philanthropy Roundtable’s 2018 annual meeting, below are ways to make the e-filing process go more smoothly for your organization.

To avoid some of the most common mistakes, note these 10 990-PF tips for private foundations:  

  1. Do not use board members’ home or business addresses; use the foundation’s address instead.
  2. The number of weekly hours worked by a board member must be disclosed, along with any compensation provided.
  3. The accrual basis is not allowed for disbursements for charitable purposes. 
  4. Carefully review expense allocations to distinguish between investment and charitable purpose.
  5. Excise tax payments should not be reflected as an investment or charitable expense.
  6. Changes to corporate documents such as Bylaws, Articles of Incorporation, etc. not previously reported to the IRS must be disclosed.
  7. Proper grantee status and address must be indicated.
  8. Returned grants must show as recoveries.
  9. Foreign grants must have documentation of proper equivalency determination or expenditure responsibility procedures performed.
  10. Unrelated business income must be disclosed.

And one final bonus tip: review the mission statement on your 990-PF to ensure that it continues to reflect the work of your foundation. Your electronic tax return will likely be accessed more frequently by a variety of interested parties—prospective grantees, other funders, media representatives, charity regulators and philanthropy critics alike—so be mindful of the story it tells.

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