IRS's Form 990 has a new look
POSTED: Sunday, January 11, 2009
The IRS has released the redesigned 2008 Form 990.
The new document includes a core form to be completed by all organizations, and schedules to be completed depending on an organization's type and activities.
In order to provide many smaller organizations additional time to adapt to the new form, the IRS is phasing-in the requirement to file the new form. Smaller organizations will be able to file short Form 990-EZ, if it satisfies both the gross receipts and assets tests set as follows:
» 2008: receipts more than $25,000 and under $1 million with assets less than $2.5 million.
» 2009: receipts more than $25,000 and under $500,000 with assets less than $1.25 million.
» 2010 and later: receipts more than $50,000 and under $200,000 with assets less than $500,000.
The smallest organizations will file Form 990-N (e-Postcard).
The IRS extensively revised the format and content of the form based on three guiding principles: enhancing transparency; promoting tax compliance; and minimizing the burden on filing organizations.
Some of the major features of the new form include a new summary page, a new governance section, enhanced reporting of executive compensation and an organization's relationships with insiders and other organizations, and new reporting for non-cash contributions.
The 2008 Form 990 allows the organization to "tell its story" up front and throughout the form. A new summary page provides a snapshot of financial, governance, and operational information, including a two-year comparison of key financial data. Numerous opportunities are provided throughout the form and schedules for organizations to provide narrative information, and Schedule O was added to allow additional supplemental responses.
The new form includes a section on governance, which covers composition of the organization's governing body, its governance and management policies, and its disclosure practices.
The section asks for information about policies and practices that the IRS believes will generally improve tax compliance. The absence of appropriate policies and procedures may lead to opportunities for excess benefit transactions, operation for non-exempt purposes, or other activities not consistent with exempt status.
The 2008 form significantly revises the reporting of executive compensation and transactions with interested persons.
As was the case in prior years, organizations must list their officers, directors, trustees, and key employees, regardless of whether they were compensated, and report compensation paid by the organization and related organizations to such persons.
The 2008 form extends the reporting of compensation paid to the organization's five highest-compensated individuals, and five highest-paid independent contractors, to all filing organizations, not just charities.
The reporting threshold for the top five highest-compensated employees and highest-paid independent contractors was raised from $50,000 to $100,000.
Organizations that must file the 2008 Form 990 for calendar year 2008 and for fiscal years beginning in 2008, should begin reviewing the new form and instructions. Preparation should include, among other things, the following steps:
» Identifying the organization's related organizations required to be listed on Sche-dule R.
» Identifying the organization's officers, directors, trustees and potential key employees and its top five highest-compensated employees
» Reviewing the new governance questions, which generally must be answered based on policies and practices in place on or before the last day of the 2008 tax year
» Identifying the schedules the organization will likely be required to complete.