If you're on the board of a small Maryland non-profit — a community foundation, a youth sports league, a local arts organization, a church or religious organization, a small social service agency — you probably ended up there because you care about the mission, not because you wanted to learn IRS forms.
Then someone asks: "Did we file the 990 yet?"
And suddenly you're the person who needs to know what the 990 is, which version to file, whether your bookkeeping is in shape, and what happens if you miss the deadline.
This guide is written for exactly that situation. We work with small Maryland non-profits all the time — most under $2M in annual revenue — and the same questions come up in every initial conversation. Here's the practical, plain-English version of everything a board treasurer or executive director should know about Form 990 compliance.
The IRS recognizes that small non-profits have less to disclose than large ones, so they created three versions of the same return. Which version your organization files depends entirely on your gross receipts and total assets:
Form 990-N ("e-Postcard")
Form 990-EZ
Form 990 (Full)
A note on private foundations: Private foundations file Form 990-PF regardless of size. Different rules apply. If you're a private foundation, you need specialized help and the rest of this post mostly doesn't apply to you.
Many small non-profits treat the 990 as a chore — file it, forget it. That's a mistake, for three reasons:
1. The 990 is public. Anyone can look up any non-profit's most recent 990 on the IRS website, Candid (formerly GuideStar), ProPublica's Nonprofit Explorer, or various other free databases. Donors look at it before giving. Foundations look at it before granting. Watchdog organizations rate it. Local journalists sometimes report on it. The 990 is essentially your organization's annual financial declaration to the world.
2. Donors actually read it. Sophisticated donors and grant-making foundations will pull your 990 before writing a check. They look at program ratios, fundraising costs, executive compensation, related-party transactions, and governance practices. A poorly prepared 990 can quietly cost you donations and grants you'll never know you lost.
3. The IRS can revoke your tax-exempt status for non-filing. More on this below — it's the biggest single risk for small non-profits.
Here's the single most important thing for small non-profit board members to understand:
If your organization fails to file the required 990 (any version) for three consecutive years, the IRS automatically revokes your 501(c)(3) status.
This isn't theoretical. It happens to thousands of small non-profits every year. And the consequences are severe:
How to know if your organization has been revoked: The IRS publishes a searchable list of automatic revocations at IRS.gov ("Tax Exempt Organization Search"). Look up your EIN. If you're listed as "automatically revoked," your status has been lost.
We see this most often with small community organizations, youth sports leagues, and faith-based groups whose volunteer leadership turned over without anyone formally tracking the annual filing obligation. By the time someone realizes, three years have passed and the status is gone.
The fix is the annual 990 filing, every year, on time. Even the 990-N takes 15 minutes if your records are reasonably organized.
Form 990 (any version) is due on the 15th day of the 5th month after your fiscal year ends.
One automatic 6-month extension is available by filing Form 8868. The extension extends the filing deadline but not any tax payments owed (rare for 501(c)(3) organizations but possible for organizations with unrelated business income).
Federal 990 filing is only part of the compliance picture. Maryland imposes additional requirements that many small non-profits don't realize apply to them:
Maryland Charitable Organizations Act
Maryland requires non-profits that solicit contributions from Maryland residents (which includes most fundraising activity by Maryland organizations) to register with the Office of the Secretary of State, Charitable Organizations Division.
Maryland sales and use tax exemption
501(c)(3) organizations can apply for Maryland sales and use tax exemption (so vendors don't charge sales tax on qualifying purchases). The application is separate from federal exemption and requires periodic renewal.
Maryland property tax exemption
If your non-profit owns real property in Maryland, you may qualify for property tax exemption. Application is filed with the State Department of Assessments and Taxation (SDAT) and the local county tax office.
Maryland income tax
Maryland generally honors federal 501(c)(3) status for state income tax purposes — but if your organization has unrelated business income (more on this below), Maryland Form 500 may be required.
Most small non-profits use QuickBooks or a spreadsheet, and most do their bookkeeping themselves or with a volunteer. The most common issues we see when we onboard a small Maryland non-profit:
Restricted vs. unrestricted funds aren't tracked separately
Donations earmarked for a specific program ("for the youth scholarship fund," "for the building renovation") are legally restricted — meaning the organization is obligated to use them for that purpose. Many small non-profits commingle restricted and unrestricted donations in a single account, which creates both legal risk and a real problem on the 990 (where net asset classifications must be reported correctly).
Grants aren't tracked properly
Grant funds often come with reporting requirements, restricted uses, and specific deadlines. Tracking grants by project, with documentation of how funds were spent and any return-of-unused-funds obligations, is essential.
In-kind donations aren't valued or recorded
Donated services, supplies, or equipment must be valued at fair market value and recorded in your books. The 990 has specific reporting requirements for in-kind contributions and the larger you grow, the more this matters.
Board minutes aren't kept properly
Non-profit governance is partly evidenced by the minutes of board meetings. The 990 asks about your governance practices — having organized, contemporaneous minutes for board decisions about compensation, conflicts of interest, and major transactions is part of demonstrating proper governance.
Pledges and accounts receivable
If donors pledge contributions to be paid in future years, that pledge is generally recorded as a receivable on your books at the time of the pledge — not when cash arrives. Small organizations often miss this.
Unrelated Business Income Tax (UBIT)
If your non-profit earns income from activities not substantially related to your tax-exempt purpose (a thrift store, an unrelated newsletter advertising program, a parking lot rented to a for-profit business), that income may be subject to UBIT. The threshold is low — $1,000 of gross unrelated business income triggers Form 990-T. Most small non-profits never trigger this, but if you do, it's a separate filing.
DIY filing works for some situations. Professional help is worth it for others. Here's the practical breakdown:
You can probably DIY (with care) if:
You should strongly consider a CPA if:
For organizations in the gray middle — small but with paid staff, multiple revenue streams, and minimal volunteer capacity — a CPA partnership is almost always cost-effective when you consider the time saved, the risk avoided, and the credibility gain with donors and grant-makers.
When small Maryland non-profits engage Mercer Flanagan, here's typically what we cover:
Annual 990 preparation. We prepare and file the correct version of Form 990 (N, EZ, or full) based on your activity. We work from your records, ask the questions your books need to answer, and review every filing with a CPA before submission.
Monthly or quarterly bookkeeping (optional). For organizations whose books need ongoing attention, we can provide basic bookkeeping services — recording donations, classifying expenses, maintaining net asset categorization, and producing monthly reports for your board.
Maryland Charitable Organizations Act filings. We handle the annual registration renewal with the Maryland Secretary of State alongside your 990.
Year-end financial statement preparation. Compiled financial statements suitable for grant applications and board reporting.
Board treasurer support. Your treasurer can call us with questions throughout the year — not just at tax time. For most boards, having a CPA available as a sounding board on bookkeeping and compliance questions is the most valuable part of the engagement.
We've been preparing tax returns for Maryland non-profits since 1971. Three things make our small non-profit practice different from typical CPA firms:
1. We actually want the small non-profit work. Many CPA firms accept non-profit clients but treat them as secondary to their larger business clients. We have multiple small non-profit clients and treat that work with the same care as any other engagement.
2. We don't offshore the preparation. Every non-profit return we prepare is reviewed and filed by an experienced CPA in our Frederick, Maryland office. Your organization's financial information stays in our office.
3. We're year-round available. Most non-profit questions don't conveniently arise at filing time. We're available throughout the year for board members and treasurers with quick questions about classification, grant reporting, or upcoming financial decisions.
If you're a board member, treasurer, or executive director at a Maryland non-profit under $2M in revenue and you'd like help with your Form 990 filing, bookkeeping, or Maryland compliance — we'd welcome the conversation.
Schedule a Free Consultation or call us at 301-662-6992.
Mention you saw this article — we'll provide a written quote within one business day, no obligation. If your organization is behind on filings or facing potential revocation, we'll prioritize the conversation.
Mercer Flanagan & Company has served Maryland's small non-profit community since 1971. We work with local foundations, churches, community organizations, youth sports leagues, and small social service agencies across Frederick County and central Maryland. Our team includes CPAs with specific expertise in non-profit tax compliance and accounting.
This post provides general information and is not legal or tax advice. Specific situations should be evaluated by qualified professionals. Tax law changes annually and key thresholds, exemptions, and filing requirements referenced in this post should be verified against current-year figures before acting.