The purpose of Form IRS-990, also known as the "Return of Organization Exempt from Income Tax," is to provide information about the activities, finances, and governance of tax-exempt organizations in the United States. Here are some key points highlighting its purpose:
1. Transparency and Accountability: Form IRS-990 helps ensure transparency and public accountability for tax-exempt organizations by requiring them to disclose information regarding their operations, programs, finances, and governance principles.
2. Tax Exemption Verification: The form serves as a means for the Internal Revenue Service (IRS) to verify the eligibility of organizations claiming tax-exempt status under various sections of the Internal Revenue Code. It helps confirm that these organizations genuinely operate for tax-exempt purposes and comply with the requirements set forth by the IRS.
3. Public Insight: Form IRS-990 allows the public, donors, potential donors, and other stakeholders to gain insights into the financial health and functioning of tax-exempt organizations. By making this information publicly available, it enhances transparency, trust, and informed decision-making.
4. Compliance Monitoring: The IRS utilizes Form IRS-990 to monitor tax-exempt organizations for compliance with tax laws and regulations. By analyzing the financial statements, activities, and governance practices reported on the form, the IRS can identify possible noncompliance, excessive executive compensation, and improper use of funds.
5. Compliance with Reporting Requirements: Filing Form IRS-990 is a legal requirement for most tax-exempt organizations receiving annual gross receipts above a certain threshold. By submitting this form, organizations fulfill their obligation to provide detailed information about their operations, finances, and governance to the IRS.
6. Data for Research and Policy Analysis: The information collected through Form IRS-990 helps researchers, policymakers, and analysts gain insights into the nonprofit sector's impact, trends, and effectiveness. This data aids in assessing the sector's overall contributions to society, evaluating its strengths and weaknesses, and informing policy decisions relating to tax-exempt organizations.
In summary, Form IRS-990 serves multiple purposes including verifying tax-exempt status, ensuring transparency and accountability, monitoring compliance, and providing valuable data for public and governmental use. Its widespread usage contributes to the effective regulation, understanding, and functioning of tax-exempt organizations in the United States.