IRS Form 990 Compensation Reporting: What Nonprofits Must Disclose

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Your Form 990 is a public document. Anyone – donors, journalists, watchdog groups, your neighbors – can look up exactly what your nonprofit pays its top people. That’s not a bug in the system. It’s the deal nonprofits make in exchange for tax-exempt status: public money, public accountability.

Which means getting your compensation reporting right isn’t just about IRS compliance. It’s about public perception, donor confidence, and organizational credibility. And yet, compensation reporting is one of the most error-prone sections of the 990. Mistakes range from innocent omissions to red flags that trigger IRS scrutiny.

This guide covers what you’re required to report, who needs to be listed, what counts as compensation, and how to avoid the mistakes that get nonprofits into trouble.

Part VII: The Compensation Disclosure Section

Part VII of Form 990 is where most compensation reporting happens. It’s divided into two sections, and understanding who goes where is the first step to clean reporting.

Section A: Officers, Directors, Trustees, and Key Employees

Section A requires you to list specific categories of people, regardless of their compensation level:

• All current officers: This typically means your President/Board Chair, Vice President, Secretary, Treasurer, and Executive Director/CEO. If someone holds the title of officer in your bylaws, they’re listed here
• All current directors or trustees: Every member of your governing board, even if they receive zero compensation (which is the norm for most nonprofit boards)
• All current key employees: The IRS defines a key employee as someone who meets all three of these tests: (1) receives reportable compensation of more than $150,000 from the organization and related organizations, (2) has responsibilities, powers, or influence similar to officers or directors, and (3) manages a discrete segment or activity representing 10% or more of the organization’s activities, assets, income, or expenses
• Up to 20 highest compensated employees: Anyone (other than officers, directors, or key employees already listed) who receives more than $100,000 in reportable compensation from the organization and related organizations
• Former officers, key employees, and highest compensated employees: Anyone in these categories who received more than $100,000 in reportable compensation during the tax year
• Former directors or trustees: Anyone who received more than $10,000 in reportable compensation as a director or trustee

This last category catches something many organizations miss: if you had a board member who resigned mid-year and received any compensation (even a consulting fee), they may need to be listed.

What Gets Reported for Each Person

For every person listed in Part VII, you report compensation in three columns:

Column D – Reportable compensation from the organization: This is the amount reported on the person’s W-2 (Box 5) or 1099-NEC. It includes salary, wages, bonuses, and other taxable compensation.

Column E – Reportable compensation from related organizations: If your nonprofit has related entities (a supporting organization, a for-profit subsidiary, etc.), compensation from those entities is reported separately here.

Column F – Estimated amount of other compensation: This is the big one that organizations underreport. It includes employer-paid benefits that aren’t on the W-2: retirement plan contributions (the employer match/contribution, not employee deferrals), health insurance premiums (employer-paid portion), life insurance, disability insurance, and other non-taxable benefits. It also includes deferred compensation that isn’t currently taxable.

Here’s where I see the most errors: organizations report salary in Column D and put zero in Column F. Unless your employees receive absolutely no benefits – no health insurance, no retirement contributions, nothing – Column F should have a number in it. For most full-time employees with benefits, that number is somewhere between $10,000 and $30,000.

Schedule J: When It’s Triggered and What It Requires

Schedule J is the deep dive into compensation. It’s triggered when any person listed in Part VII, Section A receives total compensation (Column D + E + F) exceeding $150,000 from the organization and related organizations.

Schedule J asks additional questions that can be uncomfortable but are straightforward if your compensation process is solid:

• First-class or charter travel: Did the organization pay for first-class or charter travel for any listed person?
• Travel for companions: Did the organization pay for travel for a spouse or companion of any listed person?
• Tax indemnification and gross-up payments: Did the organization pay taxes on behalf of any listed person?
• Discretionary spending accounts: Does any listed person have access to a discretionary spending account?
• Housing allowance or residence: Did the organization provide housing or a housing allowance?
• Payments for business use of personal residence: Self-explanatory, and more common than you’d think
• Health or social club dues: Country club memberships, gym memberships paid by the org
• Personal services: Household staff, chauffeur, chef provided by the organization

Answering “yes” to any of these isn’t automatically a problem – but each one draws attention. If your ED flies first class because they have a medical condition that requires it, that’s defensible. If they fly first class because they prefer it, that’s harder to justify with donor dollars.

Schedule J Part II also requires a more detailed breakdown of compensation into base compensation, bonus and incentive compensation, other reportable compensation, retirement and deferred compensation, and nontaxable benefits – for each person triggering the schedule.

What Counts as Reportable Compensation

This is where organizations consistently make mistakes. The IRS definition of reportable compensation is broader than most people realize.

Clearly Reportable

• Salary and wages
• Bonuses (including signing bonuses)
• Severance payments
• Current-year contributions to deferred compensation plans
• Taxable fringe benefits
• Director or trustee fees

Often Missed

• Employer retirement contributions: Your 403(b) match or contribution goes in Column F. This is the single most commonly omitted item
• Employer-paid health premiums: The amount the organization pays toward employee health coverage belongs in Column F
• Life and disability insurance: Employer-paid premiums are reportable in Column F
• Housing allowances: Including parsonage allowances, which are surprisingly common in faith-based nonprofits
• Auto allowances: Anything beyond IRS standard mileage reimbursement
• Expense reimbursements under non-accountable plans: If you give your ED a $500/month “expense allowance” without requiring receipts, that’s compensation

Not Reportable (But People Sometimes Include)

• Reimbursements under an accountable plan (receipts required, business purpose documented, excess returned)
• Employee salary deferrals to a 403(b) plan (these come from the employee’s pay, not the employer)
• De minimis fringe benefits (occasional small items like coffee, snacks, or holiday gifts under $25)

How Public Scrutiny Actually Works

Every Form 990 filed by a 501(c)(3) is publicly available. Organizations must provide copies upon request, and most 990s are easily searchable through ProPublica’s Nonprofit Explorer, Candid (GuideStar), and other databases.

Who’s looking at your 990? More people than you think:

• Donors: Sophisticated individual donors and virtually all foundations review 990s before making grants. They’re looking at executive compensation relative to budget size and program spending
• Journalists: Local and national reporters regularly mine 990 data for stories about nonprofit executive pay. “Local charity CEO makes more than the governor” is a headline that writes itself
• Watchdog organizations: Charity Navigator, GuideStar, and BBB Wise Giving Alliance all use 990 data in their evaluations
• Competitors: Other nonprofits in your space look at your 990 to benchmark their own compensation
• State attorneys general: Your state AG’s office oversees nonprofit organizations and reviews 990s as part of that function
• The IRS: Obviously. The IRS uses 990 data to identify organizations for audit, and compensation anomalies are a known trigger

The practical implication: your compensation reporting needs to be accurate, complete, and defensible. If someone pulls your 990 and sees your ED making $200,000 at a $1.5M organization, you need to be prepared to explain why. If your documentation supports it – proper reasonable compensation analysis, board approval with comparability data, documented rationale – you’re fine. If you can’t explain it, you have a problem regardless of what the IRS does.

Common Filing Mistakes

1. Leaving Column F Blank

As mentioned, this is the most common error. If your employees receive any employer-paid benefits, Column F should have a value. A $0 in Column F when Column D shows $120,000 in salary tells the IRS either your employee has no benefits (unusual) or you didn’t report them correctly (more likely).

2. Inconsistent Numbers Between Forms

The compensation on your 990 should reconcile with W-2s, 1099s, and other tax documents. If your ED’s W-2 shows $115,000 and your 990 shows $105,000, someone will notice. These discrepancies often result from timing differences (fiscal year vs. calendar year), but they should be reconcilable and explainable.

3. Missing Related Organization Compensation

If your ED also receives compensation from a related organization – a supporting foundation, a fiscal sponsor arrangement, a for-profit subsidiary – that needs to be reported in Column E. Splitting compensation across entities doesn’t hide it; it just makes it more confusing and raises more questions.

4. Not Listing All Required Board Members

Every director and trustee must be listed in Part VII, even if they receive zero compensation. I’ve seen 990s that only list the officers and skip the rest of the board. This is technically non-compliant and makes it impossible for anyone reviewing the 990 to understand your governance structure.

5. Getting the “Hours Per Week” Wrong

Part VII asks for average hours per week devoted to the position. For full-time employees, this is straightforward (40 hours). For board members, many organizations put 1 or 2 hours per week, which seems low for an active board but is often accurate. The important thing is to be honest. Don’t put 40 hours for a board chair who attends quarterly meetings.

6. Confusing Calendar Year vs. Fiscal Year

Compensation on the 990 is generally reported on a calendar year basis even if your organization operates on a different fiscal year. This catches organizations off guard, especially those with June 30 fiscal year ends. The 990 instructions specify that you report compensation for the calendar year ending within the fiscal year. Get this wrong and your numbers won’t match anything else.

Tips for Clean Reporting

Reconcile before filing. Before your 990 is finalized, compare the compensation figures against W-2s, payroll records, and benefit enrollment data. Fix discrepancies before filing, not after.

Track benefits throughout the year. Don’t try to reconstruct employer benefit costs at tax time. Maintain a running record of employer-paid premiums, retirement contributions, and other benefits for each reportable person.

Brief your preparer. If you use an outside CPA or firm to prepare your 990, make sure they have complete information about all compensation components. Don’t assume they’ll figure it out from the general ledger. Provide them with a compensation summary for each person who needs to be listed.

Review before it’s filed. The ED and board chair (or treasurer) should review the compensation section of the draft 990 before it’s filed. Errors caught before filing are corrections. Errors caught after filing are problems.

Keep supporting documentation. For each person listed, maintain a file with their total compensation breakdown, the source documents (W-2, benefit records), and any board approvals or compensation studies. If the IRS or a donor asks questions three years later, you want to be able to answer them quickly.

Understand the public narrative. Before filing, look at your compensation data the way a journalist or donor would. Does anything look unusual? Is there a number that needs context? If so, consider whether your organization’s website or annual report should proactively address your compensation philosophy. Transparency builds trust; defensiveness erodes it.

The Bigger Picture

Form 990 compensation reporting isn’t just a compliance exercise. It’s a governance tool. The process of gathering, verifying, and reporting compensation data forces your organization to actually know what it’s paying people and why. That knowledge is the foundation of good compensation management.

If gathering the data for your 990 feels painful, that’s a signal that your compensation recordkeeping needs work – not just at tax time, but year-round. The organizations that file clean, complete 990s are the same ones that have strong compensation processes, clear documentation, and board-level oversight. The 990 reflects the health of your compensation governance. Make sure it tells a good story – because everyone can read it.