Demystifying IRS Form 990-PF: What Nonprofits Should Know

There are five types of the Form 990, which are most commonly used by tax-exempt organizations to meet their reporting requirements with the IRS each year. However, which 990 you file depends on the type, size, and nature of your organization.

In this article, we’ll specifically be covering all you need to know about the 990 PF form, including:

• What it is, who needs to file it, and when it is due
• The different parts of the Form 990 PF
• How to file it
• Best practices and common mistakes to avoid

Let’s dig in!

The Form 990-PF is a variation of the general Form 990, which is a public document that tax-exempt organizations, nonexempt charitable trusts, and section 527 political organizations are required to file with the IRS annually.

These Form 990s include details about an organization’s finances, governance, programs, and other compliance requirements so that they can maintain their tax-exempt status.

There are five different types of Form 990s, each with different requirements and purposes:

• Form 990
• Form 990-BL
• Form 990-EZ
• Form 990-N
• Form 990-T

The 990 PF form is a reporting document for private foundations or those applying for private foundation status.

The form asks for basic identifying information, as well as information regarding your foundation’s revenue and expenses, balance sheets, staff salary information, and more.

Not all sections are required based on your foundation, so make sure to check the requirements here to see what you have to fill out. For example, foreign-based organizations can skip several sections when filling it out.

Ultimately, this form tracks that you are operating in compliance to maintain your private foundation status, so it’s critical that you file it accurately each year.

At a high level, the 990 PF form is for private foundations, but it can be a little more complex. According to the IRS website, organizations that meet the following criteria must file Form 990 PF.

• Exempt private foundations [section 6033(a), (b), and (c)]
• Taxable private foundations [section 6033 (d)]
• Organizations that agree to private foundation status and whose applications for exempt status are pending on the due date for filing Form 990-PF.
• Organizations that claim private foundation status, haven’t yet applied for exempt status, and whose application isn’t yet untimely under section 508 (a) for retroactive recognition of exemption.
• Organizations that made an election under section 41(e)(6)(D)(iv).
• Private foundations that are making a section 507(b) termination.
• Section 4947(a)(1) nonexempt charitable trusts treated as private foundations [section 6033(d)]

Form 990 PF is publicly available for anyone who wants to search for it. It can provide critical information for potential funders and donors, so it’s critical that you file it in a timely and accurate manner.

Much like the other Form 990s, the 900 PF form is due on the 15th day of the 5th month following the end of your foundation’s tax year. If that’s on a weekend or holiday, you can file by the next business day. For those who use the calendar year as their tax year, they will need to file by May 15.

If you are unable to meet the deadline, you can file an extension. As long as it’s properly filled out, it will be automatically granted.

The 990 Form PF has 13 pages that foundations will need to fill out. In this section, we’ll cover what each section is and what you need to fill in. Because it is complex, it may be best to partner with a tax professional to ensure it is filled out correctly.

1. Basic Information

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Before you dig in, you need to fill out basic information about your private foundation, including name, EIN, address, and the type of organization you are. You also need to summarize the fair market value of your assets and your accounting method.

2. Part I: Analysis of Revenue and Expenses

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This first section asks for your total revenue from various income streams, as well as your operating and administrative expenses. In the end, you need to total it out into three different areas:

• Excess of revenue over expenses and disbursements
• Net investment income
• Adjusted net income

If any of these are negative, you should enter 0.

3. Part II: Balance Sheets

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Next up is your balance sheet, taking a close look at where you were when you started your calendar year, where you are now, and what the fair market value is of your assets. You can also enter your liabilities, net assets, and fund balances in this section.

4. Part III: Analysis of Changes in Net Assets or Fund Balances

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This section asks that you add your net assets or fund balances from the beginning and end of the year and total them all up.

5. Part IV: Capital Gains and Losses for Tax on Investment Income

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If you have any investment income, you’ll want to share all the information here, including any capital gains or losses that you have accrued in a year.

6. Part V: Excise Tax Based on Investment Income

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This section continues tracking information on your investment income, this time asking you to enter in any excise tax. At the end, you’ll total if you have overpaid or if you have any tax you need to be refunded.

7. Part VI: Statements Regarding Activities

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There are two parts to this section:

• Part VI-A all organizations must fill out regarding activities that you may have taken part in throughout the year. Answer a series of yes/no questions and enter in additional information as applicable.
• Part VI-B helps determine if you need to file an additional form with your taxes (Form 4740), so answer honestly. You may need to file additional documentation and forms with your return.

8. Part VII: Information about Officers, Directors, Trustees, Foundation Managers, Highly-paid Employees, and Contractors

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You are required to disclose salary information for employees who are paid over $50,000 in a year, so make sure to include all whose compensation meets the criteria.

9. Part VIII: Summary of Direct Charitable Activities and Program-related Investments

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This section provides an additional opportunity to disclose how you’re spending money, both as charitable efforts and program-related investments. Total the expenditures at the bottom.

10. Part IX: Minimum Investment Return

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Enter any information about your investment returns. Keep in mind that foreign foundations may not need to fill out this section, so be sure to review the instructions.

11. Part X: Distributable Amount

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In this section, you’ll build on the information you entered in part IX, sharing the distributable amount of your minimum investment return. This is another part that may be optional for select foundations, including {Section 4942(j)(3) and (j)(5)] private operating foundations and select foreign organizations.

12. Part XI: Qualifying Distributions

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This section asks that you enter how much you paid to accomplish your charitable purposes, including administrative expenses, assets, and more.

13. Part XII: Undistributed Income

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There are 10 questions with multiple subparts that you need to fill out about any undistributed income that you may have accrued in the past, including current and former tax years.

14. Part XIII: Private Operating Foundations

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If you are a private operating foundation, you need to fill out this section, including information from the current and previous three taxable years.

15. Part XIV: Supplementary Information

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This supporting information is only required if you had more than $5,000 in assets throughout the year. It asks for information about foundation managers, any contributions you’ve made, grants you’ve paid or plan to pay, and more.

16. Part XV: Analysis of Income-Producing Activities

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Here you’ll summarize any additional activities that you did that produced additional income for your foundation. In the first section (A), you will list everything. In the second section (B), you will provide explanations of how they helped you accomplish your foundation’s purpose.

17. Part XVI: Information Regarding Transfers to and Transactions and Relationships With Noncharitable Exempt Organizations

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In the final section, you are asked to account for any business dealings that you engaged in with nonexempt organizations. You need to provide explanations and descriptions following the questionnaire.

18. Sign and Date Form 990 PF

Once you have filled everything out, you need to sign and date the form for electronic submission.

You are required to file your Form 990-PF electronically. The IRS no longer accepts paper submissions. To file, you need to:

1. Gather your documents and fill out the form here.
2. Select an IRS Authorized e-File provider from the list on the IRS website here.
3. Share your documents and they will file on your behalf.

Form 990 PF is a longer form with various sections that may or may not be required based on your organization. It may be best to work with a tax professional to prepare the documentation to ensure a seamless submission.

Eligibility to File 990-PF Form

Private foundations are eligible to file the 990-PF form, including those who are pending approval and have not yet applied for status. However, not all sections are required to be filled out by all foundations.

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This mostly applies to foreign-based organizations, but it’s best to double-check which sections you are required to fill out.

Online Filing of 990-PF Form

You must file your Form 990 PF online using one of the IRS Authorized e-File providers from the list on the IRS website here. The IRS no longer accepts Form 990 PFs via the mail.

Deadline for Filing 990-PF Form

The deadline for filing depends on your organization’s tax year. It is due on the 15th day of the 5th month following the end of your fiscal year. If it is on the weekend or public holiday, you may submit it on the next business day without penalty.

Consequences of Failing to File 990-PF Form

If you do not file your 990 PF form, you will be subject to penalties and fines. How much depends on the size of your organization. Small foundations will pay $20 per day for a maximum of $11,000 or 5% of the gross receipts until you file, while large foundations will pay $110 a day for a maximum of $56,000 or 5% of the gross receipts.

You may be subject to additional penalties on an individual or criminal level in some cases.

Correction of Errors on the 990-PF Form

You may file an amended return to correct any errors on your initial filing. To do so, simply check the box on the form that says it is an amended return. This document must be filed within 3 years of the original filing date or within 2 years of when the tax was paid, whichever date is later.

You may need to pay additional interest and fees following the amended return.

You can set yourself up for success when filing your 990 PF form by following these best practices.

Preparing the Necessary Information

Keep all your documentation in a centralized location and gather it for your tax professional at the end of your calendar year. The sooner you can submit it after your fiscal year ends, the more time you’ll have to prepare the form.

Checking for Accuracy

Verify that all the information you submit and all details on the form are accurate. This will prevent you from needing to file an amended 990.

Ensuring Timely Submission

Submit your document well in advance of the deadline. This will prevent you from accidentally needing to file for an extension or be faced with fines.

Keeping a Copy for Record-keeping

Always keep a copy of your 990 for your records. This will help you reference information as you wait for the form to be finalized and prove that you submitted it on time.

Because Form 990 PF is complex, people can make mistakes while filing. Here are some of the most common ones to avoid.

Filing With Incorrect Information

Including incorrect information can cause your 990 to be rejected. You may also need to file an amended return, which doesn’t look good to potential partners.

Late Filing

Filing late may not seem like a big deal. However, the fines will compound over time, and you’ll be facing a hefty penalty until you file.

Not Filing at All

You must file your 990 at the end of the year. Failure to do so could result in the loss of your exempt status, fines, penalties, and more.

Incorrect Calculation of Gross Receipts

Making mistakes during the calculation can lead you to pay additional fees and fines once they are corrected. It’s best to partner with a tax professional to ensure your 990 PF form is completed correctly.

The 990 PF form is an important document that private foundations are required to file at the end of the year. It helps track your foundation’s activities, ensuring you are operating within the confines expected by an exempt organization.

Throughout the article, you learned all there is to know about Form 990 PF, including the various sections, how to file, and so much more. Instrumentl provides additional resources, including training, webinars, e-books, blogs, and more to help you with all your needs.

Whether you’re looking to land your next grant or identify potential partners, there’s something for you at Instrumentl. Sign up for your free, 14-day trial today!