Question

What is the difference between a Not-For-Profit's Form 990 and a Not-For-Profit's annual report? What is the difference in audiences / needs / users / purpose of same? In details please

Answer 1

Not For Profit-Form 990

Not For Profit Organisation are set up to serve the society and not for earning profits. Hence they are exempted from paying taxes to Government. However such organizations are required to file information to IRS in the specified form i.e, Form 990.

• Form 990 is prescribed for filing to ensure that the business conducted by these organizations meet the responsibilities undertaken by it.
• This document can be made public which specifies objectives and its achievements which helps donors and others interested in supporting to evaluate the workings of the organization.
• This form can be a guiding document for the donors to identify other sources of revenue for the organization, potential employees can be aware of the payment scale, prospective board members can be made aware about the present board.
• It collects information in the form of disclosure of potential conflict of interest, compensation paid to board members and employees, and other information which is in direct connection with the finance for the avoidance of fraud.
• All Private foundations, Tax-exempt organization with gross receipts of $200000 or assets worth $500000, Small Nonprofits with gross receipts of $50000 or less and Organization that are tax-exempt under section 501(c),527 or 4947(a)(1) of the U.S tax code other than falling into exemption are required to file form 990.
• Form 990 is to be filed by the 15th day of the 5th month from the period accounting year ends electronically.
• Non Filing of form 990 for continuous 3 years results in revocation of Tax-Exempt status.

Not for Profit's Annual Report

Not For Profit's Annual Report is detailed information containing Financial data of the organization, its accomplishments, Objectives achieved, Impact Stories, and donor list.

• It plays an important role in providing information to the current as well as potential donors about the working of an organization and how the donation is being effectively used for the purpose for which it has been obtained.
• It is an effective way of communication about organizations' transparency and its success even though not mandatorily required by the IRS.
• It provides a summarized report of an organization 's finance through donations from various sources as well as expenses incurred by and its financial position through its balance sheet.
• It also Includes missions achieved by the organization by the inclusion of stories as to how the organization has helped to change the lives of individuals and society as a whole.

Hence the Major difference between Annual Report and Form 990 are:

1)Form 990 is a compulsory document to be filed to IRS whereas Annual Report is not required to be filed.

2) Form 990 must be filed to maintain tax-exempt status whereas Annual Report is released informative purpose.

3) Form 990 can be made public but the Annual Report is a public document which helps the organization to inform the society, prospective as well as current donor about the working and missions achieved by it.

4)Form 990 is to be filed electronically with IRS, however Annual report is made available on the organization's website.

Audiences:

Audience means the person or group of persons for whom the information is relevant.

The audience for Not for profit organization's annual report is Current as well as potential donors, board members, and others interested in the organization.

The audience for form 990 is IRS to whom the form is to be compulsorily filed.

Need:

Form 990 is needed to be filed to disclose the annual financial information to government for transparency of working of organizations .

Annual report is required to inform as well as persuade donors for financing the project .

Users:

Users of Form 990 is IRS whereas users of Annual Report are donors, board members,and outsiders.

Purpose:

Form 990 ismade compulsory so that organisations are accountable for the money collected by them through donation and used for the objective of the organisation.

Annual Report serves to inform donors , how the donation is being used effectively for changing the life of individual and society.