When it comes to nonprofit compliance, few forms are as well-known—or as misunderstood—as IRS Form 990. If you help oversee a church or ministry, you might be wondering: Do churches have to file Form 990? The answer is both simple and worth a closer look.

Do Churches Have to File Form 990?

In most cases, no.
Churches, their integrated auxiliaries, and conventions or associations of churches are automatically exempt from filing Form 990, 990-EZ, or 990-N. This filing exemption is written into the U.S. tax code in recognition of the distinct role churches play in society.

This is also acknowledged on the IRS determination letter that you receive when your nonprofit status is established. 

While most tax-exempt organizations must file a 990 annually to maintain their exempt status and provide transparency, churches are treated differently. This exemption applies whether or not the church is incorporated and regardless of its size.

Should Churches Consider Filing Voluntarily?

Just because churches aren’t required to file Form 990 doesn’t mean it’s always best to avoid it.

This might be beneficial if your funding sources come more broadly than just your local congregation or if you receive foundation and grant funding. 

In fact, preparing financial reports similar to a 990 can provide several important benefits:

• Transparency: Filing or preparing similar reports can demonstrate accountability to members, donors, and the broader community. 
• Good stewardship: Documenting how funds are managed supports the church’s commitment to integrity and wise use of resources.
• Grant readiness: Some foundations and grantors ask for financial reports similar to Form 990, even from churches.

Ultimately, voluntary reporting can be beneficial. However, I would caution that once you start filing you will want to continue or be at risk of triggering penalties and fees when you stop.  So weigh the pros and cons for this in your organization. 

What About Related Entities?

If your church operates related organizations—such as a separately incorporated school, daycare, mission group, or foundation—those entities may not qualify for the church’s filing exemption. In those cases, Form 990 filing requirements would likely apply based on the organization’s structure, activities, and revenue.

It’s critical to understand the legal distinctions between your church and any connected nonprofit entities to stay compliant and avoid surprises.

How Fractional CFO Services Can Help

Navigating these issues doesn’t have to be overwhelming. Fractional CFO services provide churches and ministries with experienced financial leadership at a fraction of the cost of a full-time CFO.

•  A fractional CFO can:
  Set up financial systems that promote transparency and accountability
•  Help distinguish between church and non-church activities for compliance purposes
•   Guide you in reporting that builds confidence with donors, boards, and financial institutions
•   Advise on unrelated business income and potential tax issues

If you’d like guidance on strengthening your church’s financial practices—without the full-time CFO price tag—let’s connect.

Ready to learn more?

Check out my website, terisaclark.com to learn about how we partner with ministries to help them have more resources to do more good.

I look forward to serving you.