In the world of nonprofit and tax-exempt organizations, staying compliant with IRS regulations is crucial for maintaining tax-exempt status and ensuring transparency. One of the key requirements is filing Form 990, the Return of Organization Exempt From Income Tax. This comprehensive guide breaks down the 2025 IRS instructions for Form 990, helping organizations understand their obligations, avoid penalties, and file accurately. Whether you’re a charity, social club, or political organization, we’ll cover the essentials based on the latest official guidance.
What Is IRS Form 990?
Form 990 serves as an annual information return that tax-exempt organizations use to report their financials, governance, activities, and compliance details to the IRS. It’s not a tax payment form but a disclosure tool under section 6033 of the Internal Revenue Code. The form promotes transparency by making organizational operations public (with some exceptions, like contributor details on Schedule B), allowing the IRS and the public to monitor for issues like private inurement, excess benefit transactions, or unrelated business income.
Key purposes include:
- Demonstrating how the organization fulfills its exempt mission through programs, grants, and services.
- Reporting revenue sources, expenses, assets, and liabilities.
- Disclosing compensation for officers, directors, and key employees.
- Ensuring adherence to rules for public charities, private foundations, and other exempt entities.
For 2025, the form emphasizes accurate classification of activities as exempt or unrelated, with public inspection requirements under section 6104. It’s also used by some states for registration and reporting.
Who Must File Form 990?
Most organizations exempt under section 501(a), political organizations under section 527, and nonexempt charitable trusts under section 4947(a)(1) are required to file annually. This includes public charities (501(c)(3)), social welfare groups (501(c)(4)), trade associations (501(c)(6)), and more. However, exceptions apply:
- Churches and certain religious organizations.
- Governmental units or affiliates.
- Organizations with gross receipts normally $50,000 or less (they file Form 990-N instead).
- Foreign organizations without significant U.S. activities.
- Disregarded entities (unless specifically required).
Specific thresholds trigger filing:
- If gross receipts are $200,000 or more, or total assets are $500,000 or more at year-end, file the full Form 990.
- Smaller organizations (gross receipts under $200,000 and assets under $500,000) can opt for Form 990-EZ.
- Section 501(c)(21) black lung benefit trusts must use Form 990 for post-2020 years.
- Political organizations file if receipts are $25,000 or more ($100,000 for state/local qualified groups).
- Donor-advised fund sponsors and controlling organizations have additional rules.
Group exemptions allow central organizations to file a combined return for subordinates, aggregating thresholds. Failure to file for three consecutive years results in automatic revocation of tax-exempt status.
Types of Form 990 Returns: Choosing the Right One
The IRS offers variations based on organization size and type:
- Form 990: The standard, detailed version for larger organizations (gross receipts ≥ $200,000 or assets ≥ $500,000). Required for black lung trusts, donor-advised funds, and certain others.
- Form 990-EZ: A shorter form for mid-sized groups (gross receipts < $200,000 and assets < $500,000). It simplifies reporting but still requires schedules if applicable.
- Form 990-N (e-Postcard): For small organizations with gross receipts normally $50,000 or less. It’s a simple electronic submission confirming basic details.
- Form 990-PF: Exclusively for private foundations, focusing on investment income and distributions.
- Form 990-T: Filed alongside 990 for unrelated business taxable income over $1,000.
Always attach required schedules, such as Schedule A for public charity status or Schedule B for large contributors.
Filing Deadlines and Extensions for 2025
Form 990 is due by the 15th day of the 5th month after the organization’s tax year ends. For calendar-year filers (January-December), this means May 15, 2026. Fiscal-year organizations follow the same timeline relative to their year-end.
- Short tax years (e.g., initial or final returns) have adjusted deadlines.
- Terminating organizations file a “final return” by the standard due date after dissolution.
- Extensions: Request up to 6 months using Form 8868 (file electronically or by mail).
- Amended returns: Use the same year’s form, mark “Amended,” and explain changes on Schedule O.
Late filings incur penalties: $20-$110 per day (capped at $11,000-$57,000 based on size), plus interest on any taxes due. Reasonable cause may waive penalties.
How to File Form 990: Step-by-Step Process?
Filing is mandatory electronically for 2025 returns via IRS-approved providers or software. Paper filing is limited. Here’s a streamlined process:
- Gather Information: Collect financial statements, governance policies, compensation details, and program descriptions. Use the same accounting method as your books (cash or accrual).
- Determine Schedules: Part IV checklist identifies needed attachments (e.g., Schedule L for insider transactions).
- Complete the Form: Start with the heading (EIN, address, officers), then move through parts on revenue, expenses, balance sheet, and governance.
- Review and Sign: An authorized officer must sign; include paid preparer info if applicable.
- E-File: Submit through an IRS-authorized e-file provider. Retain records for at least three years.
- Public Disclosure: Make the return available for public inspection upon request.
For group returns, the parent organization handles filing. Use IRS resources like the Exempt Organizations Reference Chart for specifics.
Key Sections of Form 990 Explained
Form 990 is divided into a heading and 12 parts, plus schedules:
- Part I: Summary: High-level overview of mission, revenue, expenses, and net assets.
- Part III: Program Service Accomplishments: Detail your top three programs by expense, including metrics like people served.
- Part VI: Governance: Report on board independence, policies (e.g., conflict of interest), and documentation.
- Part VII: Compensation: List officers, key employees ($150,000+), and top contractors ($100,000+), with breakdowns by source.
- Part VIII: Statement of Revenue: Categorize contributions, program fees, investments, and other income.
- Part IX: Statement of Functional Expenses: Allocate costs to program services, management, and fundraising.
- Part X: Balance Sheet: Assets, liabilities, and net assets (with/without donor restrictions per ASC 958).
- Part XI: Reconciliation of Net Assets: Explain changes from beginning to end of year.
Emphasize narratives in Schedule O for clarity.
Common Schedules Attached to Form 990
Schedules provide deeper details:
- Schedule A: Proves public charity status via support tests.
- Schedule B: Lists contributors over $5,000 (redacted for public view).
- Schedule C: Political and lobbying activities.
- Schedule G: Fundraising and gaming events.
- Schedule I: Grants to individuals or organizations.
- Schedule J: Expanded compensation info.
- Schedule O: Supplemental explanations for any part.
Assemble in numerical then alphabetical order.
Penalties and Compliance Tips
Non-filing penalties can reach $57,000 for large organizations, plus revocation risks. Other issues:
- Excess benefit transactions (section 4958): Up to 200% tax on disqualified persons.
- Unrelated business income: File Form 990-T to avoid additional taxes.
- Lobbying: Track and report to maintain exempt status.
Tips: Adopt strong governance policies, document decisions, and consult professionals for complex filings.
Recent Changes and Updates for 2025
The 2025 instructions include minor clarifications:
- Updated revenue procedures (e.g., 2025-1 for accounting methods).
- Emphasis on electronic filing and e-file for prior years.
- Refined definitions for related organizations, joint ventures, and compensation exceptions ($10,000 per item).
- Accounting standards updates (ASC 2016-14 for net assets, FIN 48 for uncertainties).
- No major structural overhauls, but focus on donor-advised funds and black lung trusts.
Check IRS.gov/Form990 for the latest.
Final Thoughts: Resources for Successful Filing
Navigating Form 990 can be complex, but it’s essential for transparency and compliance. Download the official 2025 instructions and form from the IRS website, and consider using e-filing software for accuracy. For personalized advice, consult a tax professional or visit IRS resources like Tax Exempt Organization Search (TEOS) for examples.
By following these guidelines, your organization can file confidently and focus on its mission. Stay updated, as IRS rules evolve—bookmark IRS.gov for alerts.