Navigating the Complexities in Form 990 Balance Sheet: A Comprehensive Guide
Form 990 Balance sheet involves a lot of calculations, which can be tough to deal with. Here is a quick guide on how to complete it
Among all the critical facets of nonprofit tax compliance, Form 990 holds immense significance as it ensures transparency and accountability in their operations. Showcasing an organization’s activities, governance, and finances to the IRS as well as to the public, a 990 form bolsters the reputation and public integrity of a nonprofit.
Among the various sections in Form 990, the Balance Sheet stands out as fundamental and crucial to an organization’s financial status. However, navigating the complexities of the Form 990 Balance Sheet can be tough, considering the calculations that it involves.
This article will serve as a guide to understanding the requirements and guidelines to complete the Form 990 Balance Sheet.
Purpose and Requirements of Form 990 Balance Sheet
The balance sheet in Form 990 shows a snapshot of a nonprofit organization’s financial status. Its objective is to get an exact measure of the organization’s vital financial components, such as assets, liabilities, and fund balances.
Below is the required information to complete the Form 990 balance sheet.
- Assets: Mostly, the assets list everything of value that the nonprofit owns. It includes cash, investments, accounts receivable, property, equipment, and more. Assets are typically categorized into short-term (Current) or long-term (Non-current) assets based on their value/standard.
- Liabilities: Liabilities consist of debts, obligations, or amounts owed by the organization. They include accounts payable, accrued expenses, loans, mortgages, and other payables. Similar to assets, liabilities are categorized as current (short-term) and non-current (long-term) based on their due dates.
- Net Assets/Fund Balances: Fund balances (Net assets) are estimated by the organization’s total assets minus its total liabilities.
How to complete the Form 990 Balance sheet?
Here’s the procedure to complete the balance sheet in Form 990
Typically, the IRS requires you to provide the financial values at the beginning of the Tax year (Column A) and compare them with the financial values at the end of the Tax year (Columns B &C). The balance sheet must satisfy the conditions below,
Total assets (Line 16) = Total liabilities and net assets (Line 33)
Let’s imagine the nonprofit organization “Snow Daze Charity” wants a Form 990, and here is how they can complete the balance sheet.
Assets
From Lines 1–15, the organization enters the values for the different types of assets it has. By adding all of them, it can calculate the total assets.
Here, the Total Assets (Line 16) is
- $18,000 at the beginning of the Tax year (Column A)
- $24,000 at the end of the Tax year (Column B)
Liabilities
The organization will enter all its liabilities on Lines 17–25. By adding all of them, it can calculate the total liabilities.
Here, the Total Liabilities (Line 26) is
- $8,000 at the beginning of the Tax year (Column A)
- $11,000 at the end of the Tax year (Column B)
Net Assets or Fund Balances
Based on whether or not the organization follows the accounting standard FASB ASC 958, the organization must complete the required lines in this section. If they follow FASB ASC 958, they must fill out lines 27, 28, 32, and 33. If not, they must fill out lines 29 through 33. Let’s assume that the Snow Daze Charity follows this standard.
By adding the values on all the lines completed in this section, the organization can derive the Total net assets or fund balances.
Here, Total net assets or fund balances (Line 32) is
- $10,000 at the beginning of the Tax year (Column A)
- $13,000 at the end of the Tax year (Column B).
Now, with these data, the organization can calculate Line 33, i.e., Total liabilities and net assets/fund balances.
Total liabilities and net assets/fund balances value (Line 33 = Line 26 + Line 32)
- $8000 + $1000 = $18,000 at the beginning of the Tax year (Column A)
- $11000 + $13000 = $24,000 at the end of the Tax year (Column B)
Here, you can see Line 16 = Line 33 for both the beginning and the end of the Tax year. This means the organization has completed the Form 990 balance sheet successfully!
Conclusion
Understanding the components and implications of the Form 990 balance sheet is essential for accurate completion of the form.
Throughout this article, you’ve gained insights, as well as the requirements and procedures to complete the balance sheet in Form 990, which you can use to fill out the balance sheet with accurate data! If you choose Tax990 to fill out your 990, you can simplify this filing process even further and ensure accuracy with a built-in error check system.
