What Is Form 990?

If you have ever tried to check whether a charity is legitimate, or wondered how much its leaders are paid, you have run into Form 990. It is the single most useful public document about a US nonprofit, and it is also one of the most intimidating, because a full return can run dozens of pages.

This guide explains what the form is, which version an organization files, what each part tells you, and how to read one in about ten minutes without a finance background.

What Form 990 Actually Is

Form 990 is an annual information return that most tax-exempt organizations file with the IRS. It is not a tax bill. For most nonprofits it is a detailed report on the organization's mission, programs, finances, governance, and pay for its highest earners.

Because nonprofits enjoy tax exemption in exchange for serving the public, the return is designed to be public too. Organizations are expected to make their returns available for inspection, and the IRS and several independent sites publish them online. That is what makes it possible to research a charity you have never heard of in a few minutes.

Which Version Does an Organization File?

There is not one Form 990. Which version applies depends mainly on the organization's size and type.

Churches and certain church related organizations are generally not required to file, which is one reason some large religious nonprofits leave little public financial trail. If you cannot find a return for an organization, check its type before assuming something is wrong.

What Is Inside a Full Form 990

The full return is organized into numbered parts. You do not need to read them in order. These are the ones that matter most:

• Part I, Summary: a one page snapshot of revenue, expenses, employees, and net assets.
• Part III, Program Service Accomplishments: what the organization says it did with its money, in its own words.
• Part VI, Governance: board size, how many directors are independent, and whether policies such as conflict of interest and whistleblower protection exist.
• Part VII, Compensation: pay for officers, directors, trustees, and key employees, plus the five highest paid staff above a threshold.
• Part VIII, Revenue: where the money came from, split into contributions, program fees, investments, and other sources.
• Part IX, Functional Expenses: how spending divides between programs, management and general costs, and fundraising.
• Part X, Balance Sheet: assets, liabilities, and net assets, which show the organization's financial cushion.

How to Read One in Ten Minutes

You do not need to audit a return to learn something from it. Work through five questions in this order.

On the program spending question, some watchdogs use a rule of thumb. The BBB Wise Giving Alliance, for example, expects a charity to spend at least 65 percent of its total expenses on program activities. Treat any single ratio with care, since newer organizations and those running large fundraising campaigns can look different for legitimate reasons, but a very low program share is a reason to read further.

Red Flags Worth a Second Look

A single odd number on a return is rarely proof of anything, but some patterns are worth digging into before you donate, partner, or sell to an organization.

• Late or missing returns. A gap in filings can mean disorganization, or an organization that has lost its status.
• Pay that looks out of scale. Compare Part VII compensation with total revenue. Six figure pay at an organization with a very small budget deserves a question.
• Large related party transactions. Schedule L reports dealings with insiders, such as loans or payments to a company owned by an officer.
• Very little spending on programs. A consistently low program share can mean the money is going mostly to fundraising or overhead.
• Sudden swings. A jump or collapse in revenue or net assets from one year to the next should have an explanation in the narrative sections.

None of these prove wrongdoing. Treat them as prompts to read the narrative parts of the return, check the organization's own annual report, or simply ask.

A Worked Example (Hypothetical)

To make this concrete, imagine a community food bank whose return shows $2.4 million in total revenue and $2.2 million in expenses. Part I tells you it employs 18 people and finished the year with a modest surplus, which is healthy. Part VIII shows $1.5 million came from contributions, $600,000 from government grants, and the rest from small program fees and investment income, so it leans heavily on donors and public funding. Part IX shows 82 percent of spending went to programs, 11 percent to management, and 7 percent to fundraising.

Part VII lists the executive director's pay, and you compare it with other organizations of similar size. Part VI shows a nine member board with seven independent voting members and a written conflict of interest policy. Taken together, that is a stable, well governed organization that is reasonably dependent on two funding sources. The numbers here are illustrative only, but the process is the same for any return.

Where to Find Free Copies

• The IRS Tax Exempt Organization Search, which links to returns and shows an organization's status.
• ProPublica's Nonprofit Explorer, which presents each return with searchable summaries.
• Candid, formerly GuideStar, which pairs returns with organization profiles.
• The nonprofit itself, which is generally expected to provide a copy of its recent returns on request.

Two limits are worth knowing. Returns lag: the most recent one you can find is often for a fiscal year that ended a year or more ago. And the public copy leaves out the names of most donors, so you can see how much came from contributions but not who gave it.

Form 990 for Researchers and Sales Teams

Beyond vetting, the return is a rich research tool. Part VII names the officers, directors, and key employees, which is a public starting point for identifying leadership at an organization. Comparing three years of Part I figures shows which organizations are growing, which is useful for vendors who want to reach nonprofits that are expanding and likely to invest. And Schedule A shows whether an organization is a public charity, which affects who funds it.

If you need to identify organizations before you research them, start with a list. Our guide to finding and verifying nonprofit organizations covers the tools, and our prospect list guide shows how to filter a large dataset down to the organizations that matter to you.

Deadlines and Consequences

A Form 990 is due on the 15th day of the fifth month after the organization's fiscal year ends, which is May 15 for a calendar year organization. An automatic six month extension is available by filing Form 8868. An organization that fails to file for three consecutive years automatically loses its tax exempt status, so a string of missing returns is a serious warning sign when you are vetting a charity.

Frequently Asked Questions

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