The IRS has released advance copies of the redesigned Form 990 and the related instructions. For tax years beginning on or after January 1, 2008, the new Form 990 filed by most tax-exempt organizations will involve additional disclosures. Developing a game plan now and reviewing organization policies and procedures as soon as possible should make the process more efficient. A modified Form 990EZ will continue to be available to certain smaller organizations. In fact, special transition rules outlined below may allow many organizations with annual gross revenue of less than $1 million to file the 990EZ during a brief transition period. Private foundations will continue to file the Form 990PF. The Form 990PF was not redesigned but could contain changes for 2008.
Although the 2008 Form 990 and instructions are still marked “draft”, the IRS does not expect changes to what has been released other than corrections or additional explanations. The forms and instructions can be found on the IRS web site (www.irs.gov) under the “Charities and Non-Profits” tab. The new form consists of an 11 page “core form” and up to 17 standardized schedules (Schedule A, B, C …) to be attached, if applicable. For example, the revised Schedule A will apply to public charities and require information on public charity status. Other information on the old Schedule A has been moved to other schedules or the core form with some modifications. On the redesigned Form 990, the main financial information has been moved to the end of the core form. This is a sign that the IRS has a focus on more than the numbers – details regarding governance, operations and compliance with tax laws are a major part of the form. The instructions have become more technical and include a glossary of terms.
If the old form was equivalent to a multiple choice and fill-in the-blank quiz, the new form is that plus an essay exam. In some sense, this is an internal audit of the organization’s compliance with federal tax rules. However, the resulting return is hardly an internal document as it is to be filed with the IRS and is available to the media and the public. What follows are selected highlights of significant changes to the form and new information to be gathered.
Click here to download a complete copy of the selected highlights.
Included you will find detailed information on:
- Mission and program services
- IRS Filings
- Assets and liabilities
- Fundraising and gaming
- Grants over $5,000
- Transactions with interested persons
- Non-cash contributions
- Tax exempt bonds
- Related organizations
- Phase-in time-line details
The new Form 990 remains a single form that applies to various kinds of exempt organizations such as charities, social clubs, and trade associations. While not every part or schedule will apply to each kind of organization, it is almost certain that all organizations will be reporting more information.
Penalties for an incomplete return or an incorrect return are the same as for late filing – up to $100 per day. While initially the IRS may be flexible, at some point more of these penalties may be assessed. If for no other reason, the use of standardized schedules (Schedule A etc.) will make it easier for the IRS to detect incomplete returns.
There is still time in 2008 to develop policies and procedures. Also, it should be determined who has the data that will be needed for the various parts of the return and whether data is being collected in a form that will lend itself to efficiently completing the return.
We anticipate making templates or other aids available to our clients later this year to assist in the data collection for the return. Please contact us if you would like to schedule a meeting on how this will specifically apply to your organization.
P.S. A note on Form 990N: Beginning in 2008, organizations with less than $25,000 of gross receipts were generally required to file the 990N electronic postcard. The usual exception for certain church related entities and certain other groups continues to apply. As of July 27, 2008, the IRS had only processed approximately 140,000 of these returns. For organizations with a calendar tax year, the form should have been filed by May 15, 2008. There is no penalty for tardy filing of the 2007 Form 990N. Loss of exempt status is mandated by the tax law if either the required Form 990N or another variation of the series Form 990 is not filed for three consecutive years.
Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.
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