Nonprofit tax returns, including the application for tax exemption, are open to public inspection. The most common nonprofit tax return is the Form 990. We often think of 990s as a place to get useful information about grant makers, but they are also used by many grant makers to further evaluate your organization when reviewing grant applications.
With this in mind, an important component of grant writing is ensuring that your tax returns are accurate and reflect your current mission, programs, and outcomes. You may want to consider filing a complete tax return even when it’s not required so that potential funders can learn more about what you do.
Most grant applications require a previous and current year budget. Make sure that your budget is consistent with the financial information on previous 990s. Grant makers often refer to an organization’s 990 to confirm income and expenses, program activities, and fundraising/management costs. Pay particular attention to Section III, on the Form 990, where you have the opportunity to fully describe your mission and major programs.
When preparing your Form 990, 990-EZ, or 990-N, read directions thoroughly. Complete all sections as much as possible and file an extension if you need more time to get information together. If you hire a tax professional to assist you with preparing your tax return, be certain that they have experience working with nonprofits. If you have an annual audit, your auditor will be able to complete your return for you. The redesigned Form 990 implemented in 2008 (filed in 2009) is intended to provide greater transparency on the part of nonprofit organizations, and help potential donors make informed decisions about where to contribute funds. It also provides for greater accountability on the part of nonprofits.
All nonprofits are now required to submit a tax return.
While it may seem like a headache, taking a little extra time to ensure that your tax return provides a true picture of your organization will enhance you fundraising success.
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