Should our church file Form 990 even though churches are exempt from the requirement?
Churches are one of the few organizations that are both automatically tax-exempt and automatically exempt from filing Form 990. You don’t have to file. The IRS won’t penalize you for skipping it. But “don’t have to” and “shouldn’t” are different questions.
The biggest reason churches file voluntarily is transparency. A 990 gives your congregation and donors a clear, standardized look at how money flows in and out. It shows revenue, expenses, compensation for key staff, and how funds are allocated across programs. For churches that want to demonstrate responsible stewardship, a public 990 does that in a way that internal financial reports can’t match because anyone can verify it independently.
Donor trust is closely tied to this. Larger donors and foundations increasingly expect financial transparency from organizations they support. If your church applies for grants from private foundations or community organizations, many of them require a 990 as part of the application. Without one, you may need to provide substitute documentation, and some grantors simply won’t consider organizations that don’t file.
The tradeoff is real though. A 990 is a public document. Anyone can look up your church on GuideStar or the IRS website and see exactly what your pastor earns, what you spend on facilities, and how much cash you have on hand. For some congregations that level of exposure creates tension, especially around staff compensation. This is the primary reason most smaller churches choose not to file.
There’s also the practical cost of preparing a 990. It requires organized, accurate financial records throughout the year. If your books are inconsistent or incomplete, the work to prepare a proper filing adds up. Churches that already maintain clean nonprofit bookkeeping practices will find the additional effort manageable. Churches that are still tracking finances in spreadsheets or shoeboxes will need to get their records in order first.
A few questions to help you decide. Does your church pursue or plan to pursue grants? Do your major donors ask about financial accountability? Is your congregation large enough that members can’t easily see where the money goes? If you answered yes to any of those, voluntary filing is worth serious consideration.
If your church is smaller with a tight-knit congregation that already reviews financial reports at member meetings, the 990 may not add much value. Your members already have the access and trust that a public filing would provide to outsiders.
One middle-ground approach is preparing a 990 internally for board review without actually filing it with the IRS. This gives leadership the discipline of formal reporting without making the information public. It also means you’re ready to file if the situation changes.
Whatever you decide, the foundation is having accurate books that can support the reporting. If your church’s finances aren’t well organized, that’s the place to start. Solid bookkeeping services make the 990 decision a matter of strategy rather than capability.
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