Filing a nonprofit annual report for your organization

A nonprofit organization is an organization that is granted tax-exempt status under Section 501(c)(3) of the Internal Revenue Service (IRS) tax code. Nonprofits include charitable, educational, and religious organizations. Filing annual reports helps you foster relationships with donors and sponsors and recognize people who have helped you reach your goals.

Nonprofit annual report

A nonprofit annual report documents what your organization has accomplished during the previous year and looks ahead towards the future. Your audience may include current and potential donors and sponsors, private foundations, supporters, and even the public.

This document is a valuable communications tool, as it provides the opportunity to talk about your organization's mission, projects, and finances and recognize your supporters. In this way, the report conveys your organization's commitment towards transparency and builds trust with your audience.

Annual report best practices

The design and content of nonprofit annual reports vary, but it's a good idea to incorporate the following tips:

• Have a plan. Your report needs to have a clear purpose. The report serves as a tool to persuade your audience to support your cause.
• Focus on donor accomplishments. It's easy for a nonprofit to only focus on its accomplishments over the past year. But remember, your accomplishments wouldn't happen without the help of your supporters.
• Use visuals to engage readers. Visuals are a great way to convey complex financial data so readers can understand it.
• Be honest. Sometimes things don't go as planned, so let your readers know what challenges your organization faced during the past year and how you overcame—or hope to overcome—them.
• Recognize major donors. Recognizing your supporters' accomplishments shows your appreciation for their hard work and dedication. Give them a chance to share their story.
• Call to action. One of the objectives of your report is to get people involved, so make sure your readers know how they can help support your cause.

Elements of a nonprofit annual report

Although nonprofits are not required to file annual reports, if you do decide to create one, there are certain elements you should include, no matter what type of organization yours is:

• Mission statement. Your mission statement is a one-sentence description of your organization's values and purpose.
• List of accomplishments. This is the most important section of your report. Highlight three to five core themes and include the major achievements in each of these areas.
• Financial documents. This section should summarize your organization's revenues and expenses. Include infographics—bar graphs, pie charts, tables, etc.—so readers can see at a glance how you manage your funds. Include a short narrative written in plain English that explains the meaning behind the numbers.
• Major donors and volunteers. This is the time to thank your biggest financial supporters. Include your major contributors, staff members, and board members.

Maintaining tax-exempt status

While nonprofit organizations don't have to pay federal income taxes, they do need to file the Return of Organization Exempt From Income Tax (Form 990), with the IRS to maintain their tax-exempt status. About 12 to 18 months after you file the return, which contains information about your organization's mission, programs, and finances, it becomes accessible to the public upon request.

An organization with more than $200,000 in gross revenues or assets worth more than $500,000 must file Form 990, while nonprofits with more than $50,000 in gross revenues can file either Form 990 or Short Form Return of Organization Exempt From Income Tax (Form 990-EZ).

Nonprofits that make $50,000 or less in gross revenues don't have to file the complete Form 990 but instead can file an e-Postcard (Form 990-N). The return is due by the 15th day of the fifth month after the end of the organization's fiscal year. The due date can be extended for six months by filing an Application for Automatic Extension of Time To File an Exempt Organization Return (Form 8868) before the due date or else the organization loses its tax-exempt status.