Your organization is committed to making the world better. Whether you educate, advocate, feed, or heal, your mission depends on public trust, donor support, and operational clarity. You’re doing meaningful work, but increased visibility also brings greater responsibility in how you report and operate.
One of those responsibilities? Filing IRS Form 990 correctly and on time.
The Problem: Tax Compliance Is Complicated
IRS Form 990 is more than just another annual filing, it’s a public record that showcases your organization’s financial health, transparency, and stewardship.
Yet too many nonprofits make avoidable mistakes that lead to:
- IRS penalties
- Delays in funding or grant disqualification
- Loss of donor credibility
- Risk of losing tax-exempt status
It’s easy to feel overwhelmed, especially when forms change, rules evolve, and capacity is limited.
The Guide: A Clear Approach to Compliance
You don’t need to be a tax expert. With the right guidance, preparation, and awareness of common pitfalls, your nonprofit can file Form 990 confidently and accurately.
The key is understanding what the IRS expects, and what your stakeholders will see.
The Plan: 990 Mistakes to Avoid and How to Fix Them
Mistake 1: Missing the Filing Deadline
Nonprofits must file Form 990 by the 15th day of the 5th month after the end of their fiscal year. Missing this deadline triggers automatic penalties, and repeated delays can lead to revocation of tax-exempt status.
The Fix:
Set internal reminders. Use your accounting software’s calendar features. File early when possible and consider filing for an extension using Form 8868 if needed.
Mistake 2: Choosing the Wrong Version of Form 990
There are several versions of Form 990:
- Form 990-N for nonprofits with gross receipts under $50,000
- Form 990-EZ for those with receipts under $200,000 and assets under $500,000
- Form 990 (Long Form) for larger nonprofits
Choosing the wrong version can delay processing and confuse funders.
The Fix:
Match your financials to IRS thresholds before selecting the version. When in doubt, consult with a CPA or use IRS-provided decision tools.
State-Specific Compliance Requirements
Michigan (Including Metro Detroit)
- Nonprofits operating in Michigan must register with the Attorney General if soliciting charitable contributions.
- Audit Threshold: Revenue over $500,000 requires audited financial statements.
- 990 Filing Tip: Metro Detroit nonprofits often receive city or county grants, so ensure your Form 990 aligns with local reporting requirements.
Illinois (Including Chicago)
Charitable organizations must register with the Illinois Attorney General’s Charitable Trust Bureau.
- Audit Threshold: Annual contributions over $300,000 require an independent audit.
- 990 Filing Tip: Chicago-based nonprofits should pay close attention to Schedule G for fundraising disclosures, especially if hosting events or using paid solicitors.
New York
New York’s Charities Bureau enforces some of the strictest nonprofit regulations in the country.
- Audit Threshold: Gross revenue over $750,000 requires audited financials.
- 990 Filing Tip: Be thorough with Schedule O and governance disclosures. NYC-based nonprofits often face additional scrutiny from city agencies and major foundations.
Ohio
Charitable registration is required for fundraising activities.
- Audit Threshold: Nonprofits receiving $750,000 or more in state funding must undergo an audit.
- 990 Filing Tip: Ensure accurate reporting of restricted contributions and program service revenue, especially for organizations receiving state grants.
New Jersey
Nonprofits must register with the Division of Consumer Affairs.
- Audit Threshold: Organizations with gross revenue over $500,000 must submit audited financial statements.
- 990 Filing Tip: Pay close attention to compensation disclosures and fundraising cost allocations, particularly for organizations operating in Newark or Jersey City.
Mistake 3: Inaccurate Reporting of Contributions and Revenues
Donor contributions, grants, and program service revenue must be correctly classified. Mixing restricted and unrestricted funds, or failing to report noncash donations properly, creates misleading statements.
The Fix:
Ensure your chart of accounts is aligned with IRS categories. Track restricted funds separately. Assign staff or advisors who understand nonprofit-specific accounting.
Mistake 4: Overlooking Schedule Attachments
Form 990 requires multiple schedules based on your activities, assets, and governance. Common ones include:
- Schedule A: Public support test
- Schedule B: Major contributors
- Schedule G: Fundraising events and professional fees
Missing a required schedule can lead to IRS inquiries and incomplete filings.
The Fix:
Review the IRS schedule instructions carefully. Use a checklist or filing software that auto-generates schedules based on your answers.
Mistake 5: Incomplete Governance Disclosures
The IRS wants to know if your nonprofit is well-managed. Leaving out board member lists, conflict-of-interest policies, or compensation disclosures signals poor governance—even if unintentional.
The Fix:
Document board meetings and policies year-round. Use standardized forms for conflicts of interest. Keep personnel and leadership records updated prior to filing.
Mistake 6: Errors in Program Descriptions and Accomplishments
Part III of Form 990 asks for clear descriptions of your program services and accomplishments. Many nonprofits default to vague or recycled language, which weakens their ability to demonstrate real impact.
The Fix:
Write fresh, detailed narratives of your top programs—including beneficiaries served, outcomes measured, and progress toward mission goals. Use metrics where possible.
Mistake 7: Incorrect Reporting of Fundraising Costs
Fundraising expenses must be properly allocated. Misclassifying program and fundraising costs can misrepresent how donations are use and erode donor trust.
The Fix:
Use timesheets and expense tracking tools to segregate fundraising activities. Consult with accountants on proper allocation of joint costs.
Mistake 8: Ignoring Public Disclosure Rules
Form 990 is a public document. Anyone—donors, journalists, watchdog groups—can access it. If your filing omits key data or appears inaccurate, questions will follow.
The Fix:
Review filings for consistency and clarity before submission. Have multiple reviewers if possible. Upload final versions to your website and GuideStar profile.
The Transformation: Confidence in Compliance
By avoiding these eight critical mistakes, you position your nonprofit as:
- A transparent steward of public resources
- A trustworthy partner for donors and grantmakers
- A well-governed entity that respects legal obligations
- An organization capable of growth, sustainability, and community impact
A well-prepared Form 990 does more than ensure compliance, it tells your organization’s story with professionalism, transparency, and pride.
Conclusion
Navigating IRS Form 990 doesn’t have to be overwhelming. With strategic preparation, clear communication, and an understanding of the most common mistakes—plus awareness of state-specific requirements in Michigan, Illinois, New York, Ohio, and New Jersey—nonprofits can turn tax compliance into a strategic advantage.
Your mission deserves to shine on every front. Including through accurate, transparent financial reporting. Avoid the pitfalls, follow the plan, and let your Form 990 reflect the same excellence as your programs and impact.
