Nonprofit Annual Report: Filing Requirements Explained

Kaitlin Edwards | May 30, 2024

Nonprofit Annual Report: Filing Requirements Explained

Transparency is important for a nonprofit. People want to know how trustworthy a nonprofit organization is and see the impact of the work they’re doing. A nonprofit annual report can highlight the good you’ve done, your profits, your losses, and your expenses. This can keep volunteers and investors satisfied with what they’ve helped to create.

While it may not be necessary for a nonprofit to file a conventional annual report, most nonprofits are still required to file a special type of profit, loss, and expense report with the IRS. Here’s what you need to know to keep your nonprofit compliant and how Mosey can help you stay on track.

What Is a Nonprofit Annual Report?

Most corporations, including nonprofit corporations, need to file an annual report. Nonprofit annual reports are a formality for accountability. Stakeholders, board members, donors, beneficiaries, and volunteers with your nonprofit have the right to know what you’ve done and what you intend to do in the future.

Your annual report is a great opportunity to show your hard work and entice potential donors to help you take your advocacy efforts to the next level. Your report gives people the insights they need to make an informed decision regarding their relationship with your nonprofit and the efficiency of your fundraising initiatives.

A nonprofit annual report is different from a Form 990 report, which is a profit and loss report required by the IRS. A nonprofit annual report is a voluntary step nonprofit organizations take specifically to increase trust with their supporters and donors.

How Does a Nonprofit Annual Report Differ From Other Annual Reports?

For-profit corporations are required to submit annual reports because the time and money people spend working with or investing in a for-profit corporation are considered business transactions. People make these investments and perform work with the expectation of generating a return or a profit rather than advancing a cause.

Conventional IRS-mandated annual reports don’t have the same impact on nonprofits. Nonprofits, to a certain extent, are allowed to govern their own transparency and the information they share with the people involved.

Placing information on your nonprofit’s webpage or sharing data visualization information on your social media reinforces the idea that your fundraising campaigns are effective, which is largely for the benefit of advancing your cause and appeasing your corporate partners. It’s simply a good business practice rather than a legal formality.

Do Nonprofits Have To File an Annual Report?

Nonprofits aren’t technically required to file an annual report, but they must file a similar report with the IRS. Form 990 is required to show the profits, losses, and expenses of your nonprofit over the past year. It’s similar to an annual report but isn’t exactly the same.

Form 990 is the only annual report-type form that nonprofits are legally required to file. It doesn’t need to be published publicly — it only needs to reach the IRS by the filing deadline.

Does Every Nonprofit Need To File an Annual Report?

Most nonprofit charitable organizations are required to file a Form 990 annual report. Churches, religious organizations, and some political organizations are exempt. If your nonprofit isn’t a church or a qualifying political organization, you will be responsible for filing a nonprofit 990 report every year.

What Is Form 990?

Form 990, formally called Return of Organization Exempt from Income Tax, is the informational return the IRS requires many nonprofit organizations to file every year. Although nonprofit organizations are tax-exempt, they still need to be held accountable for the donations they accept and the way they utilize their funding.

The IRS uses Form 990 to verify that nonprofit organizations are acting appropriately by recording donor information, allocating funds correctly, and achieving their goals. This form is used as a type of oversight to assure financial transparency and ascertain that nonprofit organizations are operating within the law.

Many nonprofits feel that creating a structured impact report with an organized table of contents is the easiest way to support the information contained in your Form 990 filing. You can also use this information to create a digital annual report.

What Information Do You Need To File a Nonprofit Annual Report?

A nonprofit annual report for your volunteers and donors can include any information you wish. You can present it as a slideshow presentation with compelling visuals, pie charts, infographics, graphs, and animations. If you have a propensity for graphic design, you’re free to make your voluntary annual report as visually appealing as you’d like. Since a standard annual report is a courtesy rather than a requirement, you have a lot of leeway in how you approach it.

When you’re filing Form 990, the IRS needs some basic information about your nonprofit. You need to be able to describe your nonprofit program in detail, including the goals you seek to accomplish and your organization’s mission statement. It’s a good idea to have this information handy for your nonprofit at all times, as plenty of people who are interested in your work would also like to know these answers.

You’ll also need to include information about the number of people you’ve served. This can be easy or difficult to calculate, depending on the way your nonprofit organization operates. You may serve other organizations rather than individuals. If this is the case, list the organizations you support.

The most complicated part of Form 990 is the income and expenses portion of the form. You’ll need to accurately list the total amount of income your nonprofit organization has generated and the amount of money you’ve spent. Sources of income and areas of spending must be detailed.

Most nonprofit organizations prefer to use thorough bookkeeping or work with professional bookkeepers for the sake of transparency to their donors and accuracy on their Form 990. Even if you don’t need to pay taxes on money you’ve generated, it’s a wise business decision to act as though you do.

You’ll also need to explain if your nonprofit is a new program or has created a new program or if you’re continuing the same program (or programs) you have in years past.

How To Keep Track of Your Information for Your Nonprofit Annual Report

The details that Form 990 requires can’t be pulled together at the last minute. If you don’t already have access to all of the information you need, it’s highly likely that you’re going to run into some difficulties when you’re preparing your report. Utilizing the best practices year-round can dramatically simplify the process of preparing and filing your nonprofit’s Form 990 for the IRS.

Weekly Bookkeeping

If your nonprofit receives a constant stream of donations, the easiest way to keep track of your donations is through regular bookkeeping. Smaller nonprofits find that weekly bookkeeping helps them to stay on track. If you’re a larger nonprofit or if you’re experiencing a particularly large volume of activity, weekly bookkeeping may prevent you from falling behind.

Depending on the size of your nonprofit, you may choose to use bookkeeping software that can easily be updated by an employee or member who is reasonably tech-savvy. If the budget allows, you can hire a dedicated bookkeeper or outsource bookkeeping duties to a professional.

Collecting Donor Information

From 990 not only requires you to document your donations but also who you received your donations from. Larger donations are often claimed as tax deductions, and the IRS needs you to verify donations claimed on your donor’s returns. This information also helps to verify that your funding was obtained in a legal way under honest pretenses.

The IRS will use this data to track and measure your public support percentage, which is used as a metric to define your nonprofit’s success and efficiency. The IRS requires that at least 33 percent of your donations be made by people who make up less than two percent of your total donation receipts. This proves that your nonprofit interacts sufficiently with the public and is not a system utilized exclusively by people with special interests or people simply seeking tax write-offs.

What Is the Filing Deadline for a Nonprofit Annual Report?

Organizations may utilize different calendars, so the IRS has created a timeline for when Form 990 should be due. The specific instructions state that Form 990 must be filed by the 15th day of the fifth month after the end of an organization’s calendar year.

If your calendar year begins in January, you’ll need to file Form 990 by May 15th. Your date may be different if your nonprofit organization utilizes the fiscal year calendar or operates under the assumption that your calendar year should begin the day your nonprofit was first established.

Staying Compliant With Mosey

You started your nonprofit because you wanted to serve your community, and there are many moving parts. You have a lot of things to keep track of, and business compliance is another major task on your to-do list. Let Mosey help.

Through our compliance automation dashboard, Mosey can help nonprofits monitor state compliance issues. This allows you to focus on making a difference while we help you stay on track with state compliance.

Schedule a demo with Mosey to learn how we can simplify the process of helping your nonprofit thrive.

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