The New Form 990 Requires Exempt Organizations to Provide More Information to the IRS

November 20, 2008

Form 990 is the basic income tax return required to be filed by tax exempt organizations. The form has been extensively revised for tax year 2008 and later years. One of the major reasons for the revision according to the IRS is to obtain additional information for tax compliance purposes.

Links to the IRS summary of the redesign process and a detailed explanation of the redesigned Form 990 are below.

Of particular concern to exempt organizations is the increased reporting of compensation and insider transactions. Reporting in the new form includes details of the compensation of the organization’s five highest compensated individuals and five highest paid independent contractors. Details must also be provided of the circumstances of any transaction with interested persons such as excess benefit transactions, loans, grants or other forms of financial assistance.

A new schedule, Schedule R, requires the organization to provide information on related organizations, including disregarded entities, and information regarding any partnerships which the organization has entered into with others. The IRS has had a particular interest in partnerships and joint ventures between tax exempt and for profit entities.

Additional information is to be provided regarding the receipt of noncash contributions, the disposition of assets, the independence of members of the organization’s board of directors and any activities outside of the U.S. Specific schedules have been developed for specific organizations, such as educational institutions and health care providers.

The new Form 990 will be phased in over three years. Small organizations with both gross receipts of less than $1,000,000 and assets of less than $2,500,000 will be able to file a streamlined Form 990-EZ for 2008. When the new form is fully phased in 2010, the threshold for gross receipts will be $200,000 and assets will be $500,000, with organizations below both of these thresholds being permitted to file Form 990-EZ.

All charitable organizations should be reviewing the new Form 990 now and identifying areas of concern. Smaller charitable organizations which can now file Form 990-EZ should review their practices and procedures for compliance prior to the beginning of their filing of the new Form 990.

Learn more about the Form 990 process, the changes, and more of what you need to know about the new form.

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For more information about "The New Form 990 Requires Exempt Organizations to Provide More Information to the IRS," contact Steven A. Brezinski at sbrezinski@axley.com or 608.283.6723.