Optimize Your Nonprofit’s Pre-Tax Season Checklist: 5 Essential Steps

by | Feb 13, 2024

Navigating tax season can be challenging for nonprofits, especially considering their exemption from federal taxes. While 501(c)(3) organizations don’t have to pay taxes, they must file Form 990 annually to maintain their tax-exempt status. As you may know, Form 990 shows a detailed breakdown of a nonprofit’s revenue and expenditures. It also offers an opportunity to showcase the organization’s value to the community. Nonetheless, we know that dealing with forms and taxes isn’t easy, so to take the stress out of these tasks, we’re sharing five essential tips to help streamline the processes.

Nonprofit's Pre-Tax Season Checklist

Analyze your nonprofit’s statement of functional expenses 

A Statement of Functional Expenses is a financial statement that nonprofit organizations use to break down their expenses by function (like programming, administration, and fundraising) and the nature of those functions (like salaries, rent, and supplies). It’s a matrix-style report that shows where resources have been allocated within an organization. For effective Form 990 filing, nonprofits should analyze and reference their statement of functional expenses because it includes a breakout of allocation between all functional expense categories. It corresponds well to what’s required in Form 990, helping to eliminate the need to sift through lots of other paperwork.

Determine which Form 990 you should file

Before starting the filing process, nonprofits must determine which Form 990 they should file. The correct one aligns with the organization’s gross receipts or total assets. The three options include:

990 Postcard or 990-N: For organizations with gross receipts under $50,000

990-EZ: Best suited for nonprofits with gross receipts under $200,000 or total assets under $500,000

Standard Form 990: Required for nonprofits with at least $200,000 in gross receipts or assets exceeding $500,000

Choosing the proper form ensures a smoother and more efficient filing process during tax season.

Hire an accountant to help with your annual filing 

Dealing with IRS forms, especially those related to nonprofits, can be challenging. Teaming up with a nonprofit accountant with expertise in the field (like with Form 990s) provides a better way to navigate the process. Beyond ensuring accurate and timely form submission, nonprofit accountants also offer valuable insights into your organization’s financial health, revenue diversification, and expense management. They can help with your annual financial audit, too.

Create this year’s annual budget 

An annual budget is just as vital for a nonprofit’s financial health as its Form 990. Since you’re already working through your statement of functional expenses, it’s the perfect time to compare last year’s projected versus actual budget numbers. Analyzing the variances between the two helps create a more accurate budget for next year. And setting a realistic yet reliable budget leads to more predictable finances, making it even easier to file your Form 990. It’s a preparedness strategy that pays off.

Ensure accurate accounting reports 

From tax forms to budgets to statements of functional expenses, nonprofits must keep track of a lot of paperwork. An accounting software solution offers a better, more technology-driven approach that keeps financial records accessible and well-organized. Having accurate accounting reports is essential. Regardless of the source of revenue, most donors and key stakeholders request reporting throughout the fiscal year. Many foundations require quarterly reports. Board members and volunteer committees often ask for various reports, too. Having the ability to quickly pull them and trust the real-time results is essential.

While tax season may seem daunting, following these tips can help make the process easier. And to make it even less challenging, consider outsourcing your accounting tasks to our experts at Qbix, who specialize exclusively in nonprofit accounting.

The team at Qbix can handle all of your accounting and bookkeeping functions not only during tax season but all throughout the year. Even better, Qbix can prepare your Form 990, too.

What’s more, outsourcing your accounting to Qbix usually costs less than hiring a staff accountant — and you skip all of the recruiting, training, and managing processes that come with adding headcount. You’ll save time and money, allowing you to focus on what really matters — your nonprofit’s mission.

Don’t wait – schedule a free consultation call with a friendly and knowledgeable Qbix accountant today.

Non Profit Accounting Solutions

About Us

Qbix's goal is to provide the latest cloud-based accounting technology while delivering real-time visibility into your nonprofit's financials 24/7. Numbers are our passion, but providing your nonprofit with the financial expertise needed to facilitate growth and profitability is our top priority. And because no two organizations are the same, Qbix offers the flexibility you need to accomplish your nonprofit's goals.


500A Northside Crossing
Macon, GA 31210

(478) 787-0532

Let Us Prepare Your Form 990

Save time, money, and stress. Let us prepare your Form 990. Schedule a consultation today.