Navigating Form 990: Essential Compliance Insights for Nonprofit Organizations

Written by Melissa Sikes | Mar 24, 2026 12:00:03 PM

As an assurance partner in Brown Edwards' Richmond office, I recently presented on Form 990 compliance during our winter webinar for the not-for-profit industry group. I want to share some of the key insights and common pitfalls to help your organization maximize the value of this important filing.

Form 990: More Than Just Compliance

The Form 990 is often viewed simply as a tax filing requirement, but it's so much more than that. It's your organization's opportunity to tell your story to the public, donors, and stakeholders. How you present your information can significantly impact public perception and support for your mission.

Key Areas to Get Right

Program Service Accomplishments (Page 2)

One of the most visible sections of your Form 990 is the program service accomplishments on page two. This is prime real estate for telling your organization's story. Unfortunately, I often see organizations provide just a few words on each line when they could be painting a much richer picture.

Here's my advice:

Make sure these descriptions are well-written and grammatically correct
If you have a marketing department, have them take a stab at drafting this content
Go beyond basic descriptions to truly showcase the impact of your work
Remember: this is public information that donors and grant makers will read

Communication is Critical

One of the most common sources of errors on Form 990s is lack of communication between the organization and their CPA or tax preparer. Please make sure to inform your tax preparer about:

Any bylaw changes during the year
Any program changes
Organizational structure changes
New initiatives or discontinued programs

While it's difficult for a tax preparer to go through every single question on the 990 with a client, we do ask about these types of significant changes. If there's a significant bylaw change, you can include a comment in Schedule O explaining what changed. Previously, you would attach the new bylaws, but now a statement is generally sufficient.

Board Understanding and Involvement

Your board should understand both your Form 990 and your financial statements. Here are my recommendations:

For New Board Members: As part of onboarding, provide:

A copy of the most recent Form 990
A copy of the most recent audited financial statements
Time to review and ask questions

Board members might not have the ultimate responsibility for the 990 the way management or an oversight committee does, but they should be aware of what's in it and know what to look for.

Board Review Before Filing: There's a question on the Form 990 that asks whether the board has been presented with the 990 prior to filing. Even if your CFO or management approves the 990, you can satisfy this requirement by sending it to the board before it gets electronically filed.

Many organizations present the 990 in the same meeting where they present audited financial statements. This is an excellent practice because it allows your finance committee and board to see both documents together and understand the complete financial picture.

Schedule R: Related Organization Reporting

Schedule R can be one of the more complex parts of the Form 990, particularly when dealing with related organizations. Let me walk through some key considerations.

Understanding the Reporting Requirements

Part Five of Schedule R asks about types of transactions you have with related organizations. You check boxes indicating transaction types—whether it's reimbursement of cash, shared facilities, or other arrangements.

You must disclose these transactions if they exceed certain dollar thresholds, but be careful: the thresholds aren't uniform across all transaction types.

A Common Scenario

Let me share an example that illustrates some common reporting considerations:

Imagine Organization E has a disregarded entity (a single-member LLC). During the year:

E transferred $51,000 to the disregarded entity
E paid $51,000 to Organization C (a related organization) to reimburse C for shared expenses
E paid $2,500 to C for interest

Here's how this gets reported in Part Five:

The $51,000 transfer to the disregarded entity: This is NOT reportable because it's a disregarded entity (single-member LLC). Keep this distinction in mind.
The $51,000 reimbursement to Organization C: This IS reported since it's greater than $50,000.
The $2,500 interest payment: This IS reported because there's NO threshold for interest, royalties, and rent from a controlled entity. This is frequently missed because people assume the $50,000 threshold applies to all transaction types. It does not—any amount that falls under interest, royalties, and rent (Line 1A) must be disclosed.

Schedule B: Handling Donor Information

Ask your tax preparer for a redacted or public disclosure copy of the 990 to upload to your website. Never put a non-redacted version in the public domain.

Who Takes Responsibility for Form 990?

During our webinar, I polled attendees about who in their organization takes responsibility for the Form 990. The majority indicated it was the CFO or management only. This is common, and there are ways to ensure appropriate oversight even with this structure.

The key is making sure the board has visibility into the 990, even if they're not the ones giving final approval. Transparency and good governance practices suggest that board members should at least review the document before filing.

Final Recommendations

As you prepare your Form 990, keep these principles in mind:

Tell your story: Use the 990 as a marketing tool and public relations opportunity, not just a compliance exercise.
Communicate with your tax preparer: Keep them informed of any organizational changes throughout the year.
Ensure board awareness: Even if management handles the details, board members should understand what's in the 990 and the financial statements.
Pay attention to thresholds: Different transaction types have different reporting thresholds, particularly on Schedule R.
Protect donor privacy: Always use redacted versions for public distribution and board review if donor information is sensitive.

The Form 990 is a powerful document. When done well, it communicates your mission, demonstrates your impact, and builds trust with stakeholders. When rushed or treated as merely a compliance task, it becomes a missed opportunity.

If you have questions about your Form 990 or would like to discuss best practices for your specific situation, please don't hesitate to reach out. Our not-for-profit industry group is here to help you navigate these important compliance requirements while maximizing the value to your organization.

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