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Form 990, once a relatively simple form, has been completely rewritten and become more complex. Not only are CPAs required to perform numerical computations, but they must now answer probing IRS questions.
Objectives:
Prerequisite: None
In this video, moderator Julie L. Floch closely reviews Form 990 with Diane Cornwell, CPA, founder of The Starfish Group in Crestwood, Kentucky; and Robert R. Lyons, CPA, Managing Director of Tax Services, Nonprofit Industry Group, of Marks Paneth & Shron LLP in New York City and author of this course.
(145-min. video) The DVD disk contains the video presentation and a viewable copy of the Manual.
The Additional Manual is for group study training only. Unlike other formats, it has no exam answer sheet and cannot be used to earn self-study credit.
Accepted for PFS and EA credit.
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Chapter 1 Form 990 - Basic Filing Requirements
Learning Objectives
Introduction
The new Form 990, Return of Organization Exempt From Income Tax, contains some of the most far reaching changes that the exempt organization community has had to contend with in its reporting history. There are generally two aspects associated with these changes: understanding the rationale behind what information the new form is trying to capture, and the sheer mechanics of completing the information return. Before looking at the mechanics of the new forms, there are a number of areas that need to be reviewed. Some of these are specific to exempt organizations while others are related to good accounting practices with an exempt organization slant. Some of the concerns facing exempt organizations can be as basic as who must file or not file Form 990. Other areas of concern include
After reviewing these areas, Chapter 3 will cover the specific mechanics of preparing the return. Generally, the Form 990 is an annual information return that is required to be filed with the Internal Revenue Service by virtually all exempt organizations that meet certain income thresholds, to be discussed later, that are covered by Code Section 501(a), political organizations and certain non-exempt charitable trusts.
The new Form 990 is separated into two distinct parts:
In the detailed analysis of the new form, particular attention will be paid to Part IV in order to determine which of the possible sixteen schedules will be needed. The Service estimates that most organizations will use eight of the possible sixteen schedules. Combined with the eleven required forms, there is a potential for filing nineteen forms in most cases. By comparison, this compares to a relatively simple nine page return.
In addition to Form 990, 990-EZ, or 990-N, organizations that have total gross income from unrelated trades or businesses of at least $1,000 also are required to file Form 990-T, Exempt Organization Business Income Tax Return.
Who Must File
General Requirements
With the new Form 990, the question has expanded well beyond "who must file" to "what must
be filed." With the exception of a small group of organizations discussed later in the chapter,
most organizations that are exempt from tax under Code Section 501(a) must file. Initially, any
organizations with gross receipts over $25,000, and not specifically exempted, were required to
file Form 990. The process was somewhat simplified with the Form 990-EZ for small filers with
less than $100,000 in revenues and $250,000 in assets. This was well and good unless the
organization happened to get funds from the United Way, in which case they would file a Form
990-EZ, accompanied by contribution information found in part I and a Statement of Functional
expenses found in Part II. In addition to the Form 990 and Form 990-EZ, there is now Form
990-N, referred to as an electronic postcard. For the Form 990 and Form 990-EZ, the
requirements for income/asset levels have changed. For 2008, Form 990 has to be filed by an
organization exempt from income tax under Code Section 501(a) if it has either gross receipts
greater than or equal to $1,000,000 or total assets greater than or equal to $2,500,000 at the end
of the tax year. This applies to organizations described in Code Section 501(c)(3) and
organizations described in other 501(c) subsections (other than black lung benefit trusts).
Gross receipts. Gross receipts are the total amounts the organization received from all sources during it annual accounting period, without subtracting any costs or expenses. "Total assets" is the amount reported by the organization on its balance sheet as of the end of the year, without reduction for liabilities.
According to the new instructions, for purposes of Form 990 reporting, the term "section 501(c)(3)" includes organizations exempt under Code Sections 501(e) and (f) (cooperative service organizations), 501(k) (child care organizations), and 501(n) (charitable risk pools). If an organization "normally" has gross receipts of $25,000 or less, it is required to file Form 990-N, Electronic Notice (e-postcard) for Tax-Exempt Organizations not Required To File Form 990 or 990-EZ. As with most rules, there are limited exceptions. Certain organizations described under Code section 509(a)(3) as supporting organizations are required to file regardless of the amount of gross receipts.
There have been a lot of comments offered concerning the redesigned Form 990, including the substantial number of related schedules. Fortunately, the IRS has offered some relief for small and mid-size organizations. This relief, for the next two years (2008-2009), allows some organizations that would normally have to file a Form 990 an opportunity to file Form 990-EZ. The relief is designed to allow them enough time to become familiar with the new form and its requirements. The following table sets out the modification threshold for filing the Form 990- EZ.
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