The holiday season is a popular fundraising season for charitable organizations. Nonprofit organizations often receive donations in different forms, such as volunteer hours, cash, pledges, or in-kind donations. To help during this busy season, we’ve put together a list of common donation types and the IRS requirements for reporting these donations on Form 990.
1. Non-Monetary Support
Non-monetary support should not be reported in Part I. Instead, organizations should report non-monetary support in Schedule A, Part IV.
2. In-Kind Donations
A common question with in-kind donations is how to determine their value. Nonprofits with non-cash contributions, including donated goods or services, can generally use any reasonable method to determine or estimate their value when reporting them on Form 990. Schedule B sets special instructions for valuing marketable securities. Schedule M requires reporting of the method for determining revenue attributable to different categories of non-cash contributions.
3. Reporting Donation Pledges
Charitable organizations sometimes receive donations in the form of pledges. This is where a donor pledges to give a specific amount, but then makes payments over months or sometimes years. When reporting pledges on Form 990 or 990 EZ, the IRS advises that if your organization uses the accrual method of accounting, it may discount the pledge to its present value and report this amount in the first year. You may then report accruals of the present value increments to the unpaid pledge in the second and third years. If your organization uses the cash method of accounting, it may only report the amount of the pledge it actually receives during each of the three years.
4. Volunteer Hours
While volunteers are truly an invaluable resource for nonprofit organizations, volunteer time cannot be reported as contributions in line 1 of Parts II or III of Schedule A. You may, however, describe the volunteer initiatives on the Form 990, under Part III, Statement of Program Service Accomplishments.
Nonprofit organizations can print the entire list of tips for filing Schedule A from the IRS website. You can also learn more about operating as an exempt organization.
Good luck, and remember this blog is just a helpful resource and is not meant to be a substitute for professional accounting services. Always consult a CPA or trusted professional if you seek tax or accounting advice.