Breaking Down Nonprofit Tax Form 990: Navigating Parts 4-6

Form 990: it’s a document that strikes fear into the hearts of many nonprofit organizations, but it doesn’t have to be that way.  We’re taking apart each scary portion of this form and shining a light on it!

Welcome to the next installment of our blog where we will be breaking down Form 990 part by part to help you better understand the filing process for your nonprofit organization!

In this installment, we will be taking a deep dive into Parts 4, 5, and 6 of the 990 Form

Part IV –  Checklist of Required Schedules 

Tax990 generates the necessary schedules based on the information provided on the 990 return itself. In Part IV, you will answer a variety of questions about the activities of your organization during the year to determine what schedules you are required to complete. 

If you answer ‘Yes” on any other these questions, you will be prompted to complete the associated schedule information. It is important to read each question carefully. If you answer a question incorrectly, you may end up forgetting a schedule or completing a schedule that is not necessarily required. 

Part V – Statements regarding other IRS filings and tax compliance 

Some organizations are required to complete additional tax forms like the 1120-POL for political organizations, the 990-T for unrelated business income, or W-2 and 1099 forms for wages and compensation paid to organization members or contract work. Part V explains to the IRS what additional documentation your organization files.

Just like with Part IV, it is crucial that you review each question carefully and indicate your response accordingly. If you are unsure if your organization should answer Yes or No in Parts IV, and V, we recommend speaking to the IRS or a tax preparer to ensure you comply with all IRS forms. 

Part VI – Governance, Management, and Disclosure 

Part VI is used to inform the IRS of the organization’s governing body and management, explain governance policies, and disclose practices. This helps the IRS ensure your organization remains compliant in terms of adhering to the scope of your mission.

 If the organization does not have policies and practices, the organization can answer ‘No’ accordingly, however, each line in this section will require a response. Part VI is also beneficial for the organization when reaching out to donors, funding, and volunteers. This information helps others know how the organization is run and what kind of positive practices are in place to maintain a strong and impactive approach.

The Key Takeaways for 990 Parts 4, 5, and 6

In summary, while Form 990 may appear complex, breaking it down can help nonprofit organizations navigate the path to transparency and compliance.

 Parts 4 through 6 play vital roles in ensuring that the IRS and stakeholders receive a complete picture of an organization’s activities, governance, and tax compliance. By approaching these sections with precision, nonprofits can reinforce their commitment to responsible management and maintain trust with donors, supporters, and the public at large. So, don’t be spooked by Form 990 – it’s a tool, that when understood and used correctly, can benefit both your organization and the communities you serve!

Tax990 is here to help you with Accurate and Efficient 990 E-filing!

The team at Tax 990 has your back! We are dedicated to offering an easy solution to help nonprofit organizations big and small meet their IRS compliance requirements! 

Our application is simple and streamlined, allowing you to file using Direct Form Entry, or by following the prompts given by our Interview-style filing option. With built-in IRS help text and an audit feature that uses the IRS Business Rules. 

More great news, once you file for your organization once, you can come back every year and copy over all of the relevant information to your next annual return.  We also simplify the process of completing and attaching Schedules that apply to your organization. 

Plus, if you are required to report Unrelated Business Income on Form 990-T, or file a Form CA-199 with the California Franchise Tax Board, you can easily accomplish all of this from your Tax990 account. 

With Tax990 there are no clunky downloads or getting roped into annual subscription fees.  You can pay as you file or save by purchasing your credit for next year’s return now! You and your team can collaborate throughout the filing process from a single, cloud-based Tax990 account!

Ready to get started? Create your Tax990 account today!

form 990 pt IV-VI