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Form 990 Mistakes That Can Impact Your Nonprofit’s Credibility
For many nonprofit organizations, Form 990 is one of many year-end compliance requirements competing for limited time and resources. Between advancing your mission, managing operations, fundraising, and overseeing governance responsibilities, the annual filing can easily become just another item on the checklist.
However, Form 990 serves a much broader purpose than meeting an IRS requirement. Because it is publicly available, donors, grantmakers, board members, regulators, and other stakeholders often use it to evaluate an organization’s financial health, governance practices, and overall stewardship. Errors, inconsistencies, or incomplete disclosures can create compliance concerns and raise questions about organizational oversight.
As you prepare for your next filing, here are several common mistakes nonprofits should avoid.
Assuming Last Year’s Filing Still Applies
Many organizations take the same filing approach year after year without reconsidering whether circumstances have changed. While that may be appropriate, it should never be automatic.
The form your organization is required to file depends on several factors, including its tax-exempt classification, annual gross receipts, total assets, and activities. For example, smaller exempt organizations may qualify to file Form 990-N, while others may be eligible to file Form 990-EZ instead of the full Form 990.
Organizations should also remember that limited activity does not necessarily eliminate their filing obligation. Even if programs were reduced, revenue was minimal, or operations were largely inactive during the year, filing requirements may still apply.
The consequences of overlooking those requirements can be significant. An organization that fails to file a required annual return or notice for three consecutive years automatically loses its tax-exempt status. Restoring that status can be both time-consuming and costly, often requiring additional filings, IRS fees, and professional assistance.
A best practice is to review filing requirements annually, establish internal deadlines ahead of IRS due dates, and confirm that electronic submissions have been successfully accepted.
Submitting Financial Information Without Reconciliation
Form 990 relies on information from multiple sources, including accounting records, donor management systems, payroll reports, and audited financial statements. When those records are not reconciled, inconsistencies can easily find their way into the return.
Common issues include:
- Contribution revenue that does not align with donor records
- Grant revenue reported inconsistently throughout the return
- Compensation figures that cannot be reconciled to Forms W-2 or 1099
- Beginning net asset balances that do not match the prior year’s filing
Not every difference indicates an error, but every significant difference should be understood and documented before the return is finalized.
A clear reconciliation process improves reporting accuracy, provides support for reported amounts, and creates a stronger foundation if questions arise during a board review, audit, or regulatory inquiry.
Treating Narrative Disclosures as Boilerplate
Some of the most impactful sections of Form 990 are not financial at all.
Part III requires organizations to describe their mission and program accomplishments. Yet many nonprofits simply copy narrative descriptions from prior-year filings even when programs, priorities, or outcomes have changed.
Generic statements rarely tell stakeholders much about an organization’s impact. Instead, nonprofit leaders should use this opportunity to provide meaningful context around the services delivered, communities served, and measurable outcomes achieved during the year.
For example, rather than stating that the organization “provided educational services,” a stronger narrative might describe the number of workshops conducted, participants served, or certifications completed.
Annual review by program leadership can help ensure these disclosures accurately reflect current operations and are supported by organizational records.
Forgetting That the Return Is Public
Unlike many tax filings, Form 990 is intended for public inspection. As a result, the return should be reviewed not only for technical accuracy but also through the lens of an external stakeholder.
Financial information, governance disclosures, compensation reporting, and program descriptions all contribute to how an organization is perceived by donors, grantmakers, and community partners.
Before filing, organizations should compare Form 990 to other publicly available information, including:
- Audited financial statements
- Annual reports
- Organizational websites
- Board minutes
- Approved compensation documentation
Differences may be completely appropriate, but they should be understood and, when necessary, documented or explained. Schedule O often provides a valuable opportunity to add context and enhance transparency.
Organizations should also exercise caution when preparing public-inspection copies to ensure sensitive information is handled appropriately and disclosure requirements are followed.
Creating a Filing Process That Relies on One Person
Many Form 990 issues stem from a lack of communication rather than a lack of technical knowledge. Important information often resides with multiple individuals across finance, development, operations, and leadership teams.
Even organizations with limited resources can benefit from a formal, repeatable filing process.
Consider developing a process that includes:
- Reconciling key financial records after year-end close
- Gathering information from accounting, payroll, development, and program teams
- Reviewing narrative disclosures for accuracy
- Completing internal leadership and board review procedures
- Verifying IRS acceptance of the electronic filing
A consistent process helps reduce errors, improve efficiency, and ensure the preparer has complete and accurate information.
How HTB Can Help
Form 990 is more than a compliance requirement. It is an opportunity to demonstrate transparency, accountability, and sound financial stewardship. HTB’s nonprofit professionals can help you navigate filing requirements, review reporting and disclosure considerations, identify potential issues before filing, and implement processes that support accurate, consistent reporting year after year. With the right guidance, your organization can strengthen compliance while staying focused on advancing its mission. Contact us today to start the conversation.
Cash Flow Forecasting: Turning Financial Data Into Better Decisions
Imagine reviewing a profitable month, seeing a healthy bank balance, and feeling confident about the road ahead, only to face a cash crunch a few weeks later.
Situations like this are more common than many business leaders realize. While financial statements provide valuable insight into past performance, they don’t always reveal what’s coming next. That’s where cash flow forecasting comes in.
By providing visibility into future cash inflows and outflows, cash flow forecasting helps business leaders make more informed decisions around hiring, capital investments, financing, and growth initiatives. When used effectively, it becomes more than a financial exercise. It becomes a strategic planning tool.
Financial Reporting vs. Financial Foresight
Most organizations rely on financial statements to evaluate performance. Profit and loss statements measure profitability, balance sheets provide a snapshot of assets and liabilities, and cash flow statements show how cash moved through the business during a specific period.
These reports are critical, but they share one common characteristic: they are largely focused on historical activity.
While financial statements can tell you what happened last month or last quarter, they cannot tell you whether you’ll have sufficient cash to fund a major purchase, support planned growth, or navigate a slower-than-expected season six months from now.
Relying solely on historical financial information can make it difficult to anticipate future cash needs and respond proactively to changing circumstances. By the time a cash flow issue appears in a financial report, the opportunity to address it may be limited.
Why Timing Matters More Than Profit
One of the most common misconceptions among business owners is that profitability automatically translates into cash availability.
In reality, profit and cash flow are not the same thing.
A business can be profitable on paper while still experiencing cash flow challenges if the timing of cash inflows and outflows doesn’t align. Customer payments may not arrive for weeks or months after revenue is recognized, while payroll, rent, inventory purchases, and other operating expenses continue on schedule.
Consider a business that secures a significant new contract. The project may increase profitability, but if customer payments are delayed while expenses must be paid immediately, the organization could face cash constraints despite reporting strong financial results.
Cash flow forecasting helps identify these timing gaps before they create operational challenges, giving leadership teams time to evaluate options and plan accordingly.
Using Forecasts to Make Better Decisions
Many organizations create a budget at the beginning of the year and periodically compare actual results to those expectations. A forecast serves a different purpose.
Rather than focusing on what was originally planned, a forecast answers an important question: Based on what we know today, where is the business headed?
Unlike a static budget, a forecast is updated regularly as new information becomes available. It evolves alongside the business and provides leadership with a current view of future cash needs.
Effective forecasting often requires input from multiple areas of the organization. Sales teams can provide insight into customer demand and expected revenue timing. Operations teams can identify upcoming equipment purchases, inventory needs, or vendor commitments. Finance teams can monitor collections, payment schedules, and financing requirements.
When those perspectives come together, forecasting becomes a powerful tool for decision-making rather than simply another financial report.
Signs Your Business Could Benefit From Better Forecasting
Many organizations would benefit from a more structured forecasting process, particularly if they experience any of the following challenges:
- Cash balances fluctuate significantly from month to month.
- Growth plans are delayed because future cash availability is uncertain.
- Customer payment timing regularly creates operational challenges.
- Major financial decisions are based primarily on current bank balances.
- Financing conversations tend to be reactive rather than proactive.
- Leadership teams spend significant time responding to cash flow issues rather than planning ahead.
A forecast cannot eliminate uncertainty, but it can help identify potential challenges early enough to evaluate solutions before they become urgent.
Scenario Planning and Working Capital Management
One of the greatest advantages of forecasting is the ability to evaluate multiple scenarios before making important decisions.
Rather than relying on a single projection, many organizations maintain a base-case forecast along with alternative scenarios that reflect potential opportunities and risks.
For example:
- What happens if a major customer pays 30 days later than expected?
- What happens if a large contract is delayed?
- What happens if hiring needs accelerate faster than anticipated?
- What happens if a new growth opportunity materializes sooner than expected?
Considering these possibilities in advance allows leadership teams to make decisions with greater confidence and flexibility.
Forecasting can also help improve working capital management.
In many cases, cash flow improvements can be achieved without increasing revenue or reducing expenses. Accelerating collections, improving invoicing processes, negotiating customer deposit requirements, or extending vendor payment terms can all have a meaningful impact on cash availability.
Similarly, establishing a business line of credit before it is needed can create additional flexibility when short-term timing gaps arise.
A well-maintained forecast helps leaders understand when these strategies may be appropriate and what impact they are likely to have.
Building a Sustainable Forecasting Process
Creating an effective forecasting process does not necessarily require sophisticated software or complex financial models.
Many organizations begin with a straightforward framework that identifies recurring cash outflows, expected cash receipts, and major upcoming expenditures. The most important factor is consistency.
Regularly updating assumptions and monitoring results against projections often provides greater value than a complex forecasting model that is reviewed infrequently.
As organizations grow, forecasting can become more closely tied to broader strategic decisions, including expansion plans, hiring initiatives, pricing adjustments, capital investments, and financing strategies.
When forecasting becomes part of the organization’s decision-making process, it evolves from a reporting exercise into a valuable leadership tool.
How HTB Can Help
Financial statements remain an essential part of managing a business, but they only tell part of the story. Cash flow forecasting provides the visibility leaders need to anticipate challenges, evaluate opportunities, and make informed decisions with greater confidence.
At HTB, we help business owners and leadership teams move beyond historical reporting and use financial information as a strategic planning tool. Whether you’re evaluating growth opportunities, strengthening working capital, preparing for financing discussions, or building a more robust forecasting process, our advisors can help you develop an approach tailored to your organization’s goals.
By combining financial insight with practical business guidance, we help clients turn financial data into better decisions that support sustainable growth and long-term success. Contact us today to start the conversation.
Prepare Now for a Smoother W-2 Season
As year-end approaches, now is an ideal time for employers to take a proactive look at payroll records before W-2 reporting begins. With only a few months remaining in the calendar year, addressing potential issues now can help reduce administrative burdens during W-2 season and give employees time to make any necessary withholding adjustments.
Review Employee Information
Employers should verify that employee names, addresses, and Social Security numbers are accurate and up to date. Even minor discrepancies can create delays or require corrections during the W-2 filing process. It’s also a good time to confirm that former employees have current mailing addresses on file, as W-2s must be provided to all employees who received wages during the year.
Encourage Employees to Review Form W-4
Life events such as marriage, divorce, the birth of a child, or significant changes in household income can affect an employee’s tax withholding needs. Encouraging employees to review their Form W-4 now allows them to adjust withholding before the end of the year and helps reduce the likelihood of unexpected tax bills or large refunds when they file their returns.
Employees may also find the IRS Tax Withholding Estimator at IRS.gov helpful when evaluating their current withholding elections. For additional information on 2026 Form W-2 and W-4 updates, click here.
Review Benefit and Deduction Reporting
Before year-end, employers should review payroll deductions to ensure employee benefits, insurance premiums, retirement plan contributions, and other withholdings have been deducted and remitted correctly throughout the year. Addressing discrepancies now can help avoid reporting issues, employee concerns, and time-consuming corrections during W-2 preparation.
Businesses should also confirm that employer contributions to retirement plans and other benefit programs have been properly recorded and funded.
Evaluate Taxable Fringe Benefits
Employers that provide fringe benefits should begin gathering the information needed for year-end reporting. Common taxable fringe benefits include:
- Personal use of a company vehicle
- Group-term life insurance coverage exceeding $50,000
- Employer-paid moving expenses (with limited exceptions)
- Gift cards and other cash-equivalent awards
-
Greater-than-2% S corporation shareholder health insurance premiums
-
Cell phone allowances exceeding $100 per month
Reviewing these items now helps ensure the appropriate amounts are included in employee wages before W-2s are prepared.
Consider Electronic W-2 Delivery
Many payroll systems offer secure electronic delivery of W-2 forms. In addition to providing employees with faster access to their tax documents, electronic delivery can help reduce the risk of forms being lost, delayed, or intercepted through the mail. Employers should review their payroll provider’s available options and ensure employees are properly enrolled if electronic delivery is offered. QuickBooks Payroll users can provide employees with electronic W-2 access through the Workforce platform.
Plan Ahead for Employee Bonuses
As businesses begin planning holiday and year-end bonuses, it’s important to remember that bonus payments are taxable wages and should be processed through payroll. Rather than issuing separate checks outside the payroll system, employers should ensure bonus payments are properly reported and subject to the appropriate tax withholding requirements.
Start the Fourth Quarter Strong
A little preparation now can go a long way toward creating a smoother year-end reporting process. By reviewing employee information, evaluating withholding elections, confirming benefit and deduction reporting, planning for employee bonuses, and identifying taxable fringe benefits, employers can reduce last-minute stress and be better prepared for W-2 season.
At HTB, we understand that payroll compliance and year-end reporting can be time-consuming and complex. Our team works with businesses of all sizes to address payroll, tax, and accounting considerations throughout the year. If you have questions about payroll reporting, employee withholding, or year-end tax planning, contact us to learn how we can help support your business goals.
State Tax Nexus in 2026: Understanding Your Multi-State Tax Obligations
As businesses expand beyond their home state, many owners are surprised to learn that their tax obligations may expand as well.
Hiring remote employees, selling products online, working with contractors in other states, or using third-party fulfillment providers can all create tax responsibilities in jurisdictions where a business has never opened an office or established a physical location.
The concept that determines when these obligations arise is known as nexus. While the rules vary by state and tax type, nexus generally refers to the level of connection a business has with a state that allows it to impose tax, registration, or filing requirements.
Understanding where nexus may exist can help businesses minimize compliance risk and avoid unexpected obligations as they grow.
Understanding Nexus
Nexus is not a single rule that applies uniformly across all taxes. Sales tax, income tax, payroll withholding, unemployment taxes, business registration requirements, and gross receipts taxes may each have different standards. Those standards can also vary significantly from state to state.
Generally, nexus is established in one of two ways:
- Physical presence within a state
- Economic activity within a state
Both can create significant tax and compliance obligations.
Physical Presence: It’s More Than Just an Office
Historically, nexus was most commonly associated with maintaining an office, storefront, warehouse, or other physical location within a state. Today, the definition is much broader.
Remote Employees and Contractors
One of the most common ways businesses create nexus is through remote workers.
In many states, having an employee working remotely may create payroll tax, unemployment insurance, registration, or business tax filing obligations. Depending on the state and circumstances, a single employee may be enough to establish nexus.
Independent contractors can create similar concerns. Whether providing sales support, consulting services, installation work, or customer assistance, individuals working on behalf of a business in another state may create filing or registration requirements.
Remote work can also create payroll complexities. Certain states, most notably New York, apply a “convenience of the employer” rule under specific circumstances. Depending on the facts, employers may be required to withhold tax even when employees perform services outside the state.
Even when the initial obligation is primarily administrative, failing to identify requirements early can create compliance issues later.
Inventory Held by Third-Party Fulfillment Providers
Businesses selling products online should also consider where inventory is stored.
Companies that use Amazon FBA or other fulfillment networks may have inventory distributed across multiple states, often without actively selecting those locations.
In many states, inventory stored within a state’s borders may create nexus, potentially resulting in registration, reporting, or tax obligations. Even where marketplace facilitators collect and remit sales tax, businesses may still have additional compliance responsibilities to evaluate.
Economic Nexus: When Sales Activity Creates an Obligation
Nexus is not limited to physical presence.
Following the Supreme Court’s decision in South Dakota v. Wayfair, states gained authority to require remote sellers to collect and remit sales tax based on economic activity alone.
Today, every state that imposes a statewide sales tax has adopted some form of economic nexus standard.
The most common threshold is $100,000 in annual sales into a state, although some states use higher thresholds. For example, California and Texas currently apply a $500,000 threshold.
Once a business exceeds a state’s threshold, registration and sales tax collection obligations may arise, even if the business has no employees, property, or physical location in that state.
Important Considerations
When evaluating economic nexus exposure, businesses should keep several factors in mind:
- Not all sales are treated the same. Some states measure thresholds using gross sales rather than taxable sales, meaning exempt transactions may still count toward the threshold.
- Marketplace sales may be included. Sales made through platforms such as Amazon, Etsy, or similar marketplaces may count toward nexus thresholds, even if the platform handles sales tax collection.
- Transaction-count thresholds are becoming less common. Many states have moved away from thresholds based on the number of transactions and now focus primarily on sales volume.
Common Nexus Triggers
Several business activities frequently warrant a closer look, including:
- Hiring employees in states where the business has never operated before
- Expanding online sales into new markets and approaching economic nexus thresholds
- Storing inventory in multiple states through marketplace or fulfillment providers
- Using contractors or employees to perform services across state lines
If any of these situations apply to your business, a nexus review can help determine whether additional compliance obligations may exist.
Taking a Proactive Approach
A nexus review can help identify where obligations may exist and whether action is needed. Areas to review often include:
- The location of employees and contractors
- Inventory locations, including third-party fulfillment providers
- Sales activity by state
- Potential economic nexus thresholds
- The specific products or services being sold
Even when historical exposure exists, businesses often have options available. Many states offer voluntary disclosure programs that may help limit penalties and reduce lookback periods for businesses seeking to come into compliance.
Because nexus rules continue to evolve, periodic reviews are often more effective than a one-time assessment. Businesses should revisit their state tax footprint whenever they expand into new markets, hire employees in new locations, add fulfillment arrangements, or experience significant revenue growth.
How HTB Can Help
As businesses grow, state tax obligations can become increasingly complex. Activities that seem routine, such as hiring a remote employee, expanding online sales, or using a third-party fulfillment provider, may create filing and compliance requirements in states where a business has never operated before.
At HTB, we help businesses evaluate their state tax footprint, identify potential nexus exposures, assess compliance requirements, and develop practical strategies that support continued growth. Whether you’re expanding into new markets, managing a remote workforce, or simply looking to better understand your multi-state tax obligations, our team can help you evaluate your situation and determine the most appropriate path forward.
By taking a proactive approach, businesses can reduce risk, avoid unexpected surprises, and focus on growth with greater confidence. Contact us today to start the conversation.