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Tuesday April 7, 2020 comments Tags: 990, accounting, nonprofit

Any accounting business or tax advice in this 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. Hey, it is Chyla Graham time for another episode of the nonprofit nuggets podcast. This season is all about the IRS form 990 the informational return for nonprofits this season. I wanted everyone to make sure that nonprofit leaders have a better understanding of the form and how it fits into the foundational pieces of a healthy nonprofit. Those pieces being your mission, your priorities, your tools, and your storytelling. For that reason. This season is brought to you by my DIY 990 clinic, which will be on April 21st, 2020 at 9am mountain. It's for those of you who plan on filing your own 990 but want to have access to a CPA while working on that form. It's also for you if you are able to set aside 90 minutes to work on the form so you continue your work within the community, check out the link in our transcripts to learn more.

Okay. So this episode is specifically about the tools. So as you know, I think tools are, like you can't do it all in your head. So you need things outside of yourself to get your nonprofit going, to keep it sustainable, manageable, practical. And the 990 is one of those things. People underestimate what you can do with your 990. It is a tool. So because it is an information return, it is where a lot of funders are going to gain information about an organization, especially if you do not have your audited financial statements or any financial reports on your website. The 990 helps funders and helps outsiders understand what you're doing and it helps them compare you. I know I said last season we are not about comparison. We're not about competition, but comparisons are practical.

So the 990 tries to standardize some of the ways that organizations report certain information that way those who are reviewing them can say apples to apples. What's happening? So how does the 990 do that? Because it has a standard format all nonprofits have to say our numbers fit into this bucket. And that's helpful for the outsider who's just like, I don't understand what you mean when you say this thing that works internally, but it doesn't work for me to compare you to the people down the street or the people across town. So how do you use it as a tool now that you standardized things? How is it going to be easy to feel? Well, one you can talk about the effects of fundraising.

On schedule G of the IRS 990. It is a supplemental schedule, but if you were having fundraising, it is definitely one of the schedules that you want to fill out. And that's because it helps organizations decide what are they doing for fundraisers and how much are they netting? This is a valuable tool because sometimes we do fundraisers and we think that, Oh my gosh, this is just an amazing event. And continuously we do it and then we're like, Oh crap. It didn't bring in as much money as we wanted and we never do a secondary gut check to say, so what are we gonna do differently? The 990 allows you a time to say, what are we going to do differently? Because on that schedule G there is Part 2 that talks about fundraising events. So it asks you to name what are your events? So if you said, Hey, we had more than $50,000 in fundraising income contributions and you would say, okay, well let's hear about all those events that brought in more than $5,000. And you'd say, okay, this is the event, our gala, our bowling night, our karaoke, whatever those events were. And you'll say, okay, this is what we brought in minus what did people contribute? So you might have ticket sales. But then there were people who said, Oh, I want to just give you some money. You take out that? And now you have like, Oh, this was the income that's purely from this event. It's not because people love us. And they were like, Oh, I'm happy to support you. They're like, no this is your event. This is what we brought in because of the event, not because of our Goodwill in the community. And then it talks about, well, how much did you spend? What were your prizes? What did food cost, what facilities did you have to rent, entertainment, all of those things. And I love that it actually breaks it into those categories because sometimes we're not realizing how much we're spending on specific things. And so we don't have a chance to analyze is this actually a good use of our money.

So by being able to say, okay, we gave cash prizes or we gave actual packages and like, Ooh, a night stay at such and such place versus what did it cost for the place versus catering. I think those are really good to separate out because then you can think through costs especially if your venue is not providing the food, you can now think, okay, what if we kept the food but we looked at different venues, how could that have changed things? It's not my favorite form, but I definitely think it's one of the most useful forms. Especially if you were doing or are planning on doing fundraising. Even if you're like, oh crap, we didn't actually have big events. I would actually say do this exercise at least annually so that your organization is getting used to seeing that so that you guys are being like, okay, so are we still going to do that? What are our other options? Doing it right after so that you can get that quick glance. It gives a really nice breakdown of how you could be presenting it to your board.

So even if you're thinking, oh the 990 isn't useful, it is because that's one of the ways that it can be very, very useful for your organization and for your organization to compare how your events are compared to other people's events and thinking through like what could we be doing differently? Could we like talk to these people to see how are they managing to pull off some of these fundraisers the way they're doing. Another reason you should consider your 990 to be a tool is because of local giving days. More and more cities States. Yeah. When the cities, the States and by general regions, um, are doing their local giving days.

So Colorado has Colorado Gives Day, Miami has Miami Gives Day. There's one in Louisiana, there's one in Maine, they have local giving days. And as part of your submission process to be a participant, most require that you submit a copy of your 990. This is because they are doing vetting on behalf of their donors. So like in Colorado where they're allowing nonprofits to be on this major platform and say, Hey, we're going to be on this platform, give us the money. They're doing some of the vetting on behalf of the donors. They're building their donor trust. And so by getting all that information in one place, it makes it easier for donors to make a decision on giving. So get your 990 so that you can be sure to participate.

So one of the things is that the 990 shouldn't just be considered a tool. The 990 will help you consider what tools you might need to have in place. So one of the tools I find it helps organizations think about in determining things to have in place is a customer relations management, a CRM. And that is because in part of the return when it asks about a schedule of donors, it wants to know what donors are giving you more than $5,000. There are some particulars we could go into, but we won't right now. We will during the DIY course, but not now because I remember that first episode was a little intense. So, by having a list where you can say, run me a report of donors giving totals greater then $5,000 it makes it easier for you to then put that information into your system.

It actually is also a really great way to compare what's going into your accounting system, what's going into your CRM because your 990 is based mainly on what's in your accounting system. So by comparing what's in your CRM or if you're using Salesforce or whatever, Salesforce or neon or whatever database you're using, by comparing those two, you can see if there's any discrepancies. Is there something that you might need to fix in your systems? Um, it made this make you think, Oh, we should really actually communicate this information sooner.

But definitely think about what tools as you prepare your 990, what tools does it make you think, Oh, we should definitely have this in place to make it easier. And along the lines of tools on how to file your 990, consider would you pay? There are two ways to file your IRS 990. You can do it electronically or you can do paper. If you're doing the IRS form 990N you can only do it via online. The IRS has its own website where you can go ahead and file. If you are filing a 990N do not not pay someone to file your 990 for you. I don't care if it's me or somebody else it is not worth it, unless it's free. But if they're like, we're going to charge you, it's not actually worth it because you can answer the questions yourself.

There are websites though that I would recommend, but after checking out the IRS, IRS has a listing of online filers and when I looked at that list, there were three online filers that I would say people should check out if they're planning on filing on their own. Those would be file990.org, expresstaxexempt.com, and efile.form990.org and of those three from a pricing perspective, I would consider the efile.form990.org because they do a sliding scale fee structure. So they are going to say based off of how much revenue you have, this is how much your fee will be. And so if you're like thinking about what tools would I use to file my 990, those are three that are listed on the IRS website and based off of my checking out the website, those are three that I thought would be worth you checking out to see which one you like better and is it worth it. Hope you found this episode to be helpful and hope you realize how the IRS form 990 can serve as a tool for your organization and how it can help highlight tools that you can better implement.