Affiliate chapters have financial reporting responsibilities to the IRS. The following resources will help your affiliate chapter meet those financial reporting responsibilities.
Submitting the 990 The Top Ten Changes Nonprofits Need to Know About the Revised Form
In December 2007, the Internal Revenue Service gave the Form 990, an annual “informational return” filed by nonprofit organizations, a long overdue makeover. In revising the 990, the IRS is collecting new information on each nonprofit’s governance and organizational policies to ensure accountability and to encourage compliance with the tax code. The form also requires more organizations to reveal information on lobbying and executive compensation. The agency’s work resulted in a drastically different look to the form for the first time in nearly 30 years.
Below is a synopsis of the major changes the IRS implemented on the revised form. Your Form 990 will be available to the public, and it is important to know what has changed to avoid filing erroneously or raising red flags.
You don’t need a camera for this snapshot.
- Some of the changes made to the 990 allow organizations to provide a more complete picture of their workings. A summary on the first page of the form includes a field to explain the mission and activities of an organization, giving it a chance to tell its story before disclosing the nitty-gritty financial details. As with the 2007 version, an organization can use Part III of the 2008 core form to describe its three largest programs based on their expenses.
- But a form exists when a picture can’t paint a thousand words.
- One of the 14 new schedules added to the revised 990 is Schedule O, which provides organizations an opportunity to expand on any other important programs that they have undertaken. A nonprofit organization can also use this section to detail in narrative form any of the answers that it provides to the IRS.
- Note which schedules you will have to file along with the core form.
- Part IV of the core form lists questions to help an organization determine which particular schedules it will have to complete on top of the core form. Because there are 14 new schedules, some of which include information previously disclosed on the core form, it will be necessary to go through the checklist to ensure you’ve filed all of the necessary information with the IRS.
- Lobbying activities aren’t just for LDA reports.
- 501(c)(3)s involved in lobbying and other organizations subject to a proxy tax must fill out Schedule C of the 990, which asks for information on political campaign and lobbying activities. Previously, this information was disclosed on Schedule A. If you file lobbying expenditure reports with the House Clerk and Senate Secretary under Internal Revenue Code definitions, you should use that information to answer questions in this section. If you file lobbying reports under the LDA definitions, note that there are differences between how the tax code and the congressional language define lobbying activities and lobbying contacts.
- Keep other tax forms in mind.
- New to the core form, Part V requires organizations to answer various questions based on other tax forms they have filed, including the W-3, the 8886-T and the 8282. There are also questions specifically referring to 501(c)(3) and 501(c)(7) organizations.
- Track how you govern and manage.
- For the first time, organizations will need to disclose their methods of governance to the IRS. Some types of information include:
- the number of voting members on the board
- significant changes made to an organization’s bylaws
- whether there is written documentation of meetings and actions taken by the board
- The form also asks whether organizations have conflict of interest and whistleblower policies, and if organizations received independent consultation on determining the compensation for their executive director and other key employees.
- Payday disclosure is no longer just for charities.
- Previously, only 501(c)(3) organizations had been required to fill out a section on Schedule A disclosing its five highest-paid employees and five highest-paid independent contractors. This section now appears on the core form and applies to all nonprofit organizations. The five highest-paid employees of an organization not listed as an officer, director, or key employee and the five highest-paid independent contractors, must be disclosed if they received more than $100,000. Details on compensation for any officer, director or key employee earning more than $150,000 must be listed in Schedule J.
- Keep your records in a safe place.
- The prior year’s records are necessary for the summary page of the core form, as they are reported alongside the current year’s revenues and expenses. The IRS also recommends keeping records related to income, deductions or credit for 7 years after filing.
- Adhere carefully to IRS guidelines.
- It is important to follow the instructions provided by the IRS, even for matters as simple as rounding numbers. Although the instructions allow filers to add together two numbers with decimals, they also state that any final numbers should be rounded. The IRS also requires that each line of the 990 be completed.
- Accountability is key.
- One of the main goals in revising the Form 990 was to increase the transparency of information on nonprofits. Although the IRS does not require certain policies to be in place–such as handling conflicts of interest and the independent review of executive compensation–the agency hopes that by inspiring nonprofits to self-regulate, the organizations will be less likely to run afoul of the law.
Annual Electronic Filing Requirement for Small Exempt Organizations — Form 990-N (e-Postcard)