Charities Ready and Willing to E-file

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Contents

EXECUTIVE SUMMARY

INTRODUCTION
   Scope of Survey and Methodology Used
     Scope
     Methodology

FORM 990 PREPARATION PRACTICES
   External Preparer Characteristics
   Internal Preparer Characteristics

PRIOR E-FILING EXPERIENCE AND LIKELIHOOD OF E-FILING IN THE FUTURE
   E-filing History
   Likelihood of E-filing Form 990
   Perceived Benefit to the Organization

INCENTIVES AND CONCERNS
   Incentives
   Concerns

CONCLUSION

APPENDIX A. Questions Asked in Telephone Survey of Nonprofit Financial Executives

APPENDIX B. Summary of Survey Results from GuideStar Web Site

EXECUTIVE SUMMARY

The Internal Revenue Service and state charity offices have been seriously considering the possibility of implementing an electronic filing system for nonprofit organizations filing IRS Form 990 and annual state charity registration documents, in order to improve the quality of filed returns and reduce the cost of processing them. In order to provide objective information to decision makers about the potential for widespread adoption of e-filing in the nonprofit sector, the National Center for Charitable Statistics at the Urban Institute conducted a telephone survey of 485 nonprofit financial executives. The purpose of the survey was to assess nonprofit capacity to e-file, identify existing concerns and possible incentives, and describe the methods nonprofits currently use to prepare Form 990.

Responses of the executives surveyed were analyzed according to two variables—the size of the organization, and whether Form 990 was prepared in-house (internally) or by an outside, paid professional (externally). These variables were selected to test whether technical capacity is a barrier to e-filing; that is, whether smaller nonprofits have access to an Internet connection necessary for e-filing or appending an electronic signature, and whether those organizations that prepare their returns internally have the technical sophistication to download and use software for preparing and e-filing their return. The survey results showed that technical capacity is not a serious barrier to electronic filing. Of the very smallest organizations—those with zero paid staff—that prepare Form 990 internally, 86 percent report having Internet access. This percentage rose to over 96 percent in those organizations with 50 or more employees.

The survey showed that a large majority of nonprofit financial executives are likely to e-file their Form 990. Seventy-three percent of all financial executives surveyed said that they would be very likely or somewhat likely to electronically file their Form 990, or to recommend e-filing to their professional preparers, as long as there were free, easy-to-use software available to do so. Those who file their Form 990 internally, and those whose organizations have 50 or more employees, are even more enthusiastic.

Survey respondents were offered lists of potential incentives to promote e-filing and concerns that may prevent them from doing so. Their responses showed that nonprofit CFOs are price-sensitive when it comes to filing their Form 990. The incentives that generated the most interest were reducing state registration fees for e-filers (with 57 percent reporting that they would be more likely to e-file if this incentive were offered), free or low cost e-filing (55 percent) and provision of an electronic receipt (53 percent.) On average, organizations that prepare their returns internally and have zero paid employees were most likely to be influenced by all of the incentives listed.

The possible concerns that generated the most trepidation among nonprofit financial executives were the ability to append complex attachments to e-filed returns (with 72 percent of respondents strongly or somewhat agreeing that this was a concern) and the security and confidentiality of information (57 percent). Respondents reported a low level of concern for the effort required to learn the process of e-filing and issues surrounding the accuracy of e-filed returns.

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