IRS Sets New Filing Thresholds For Form 990

January 7, 2008       Mark Hrywna      

The Internal Revenue Service (IRS) will phase in a new filing threshold that by 2010 will require $200,000 in gross receipts, and $500,000 in total assets, before a nonprofit must file a Form 990 EZ.

In the meantime, organizations with gross receipts of more than $100,000 or total assets of at least $250,000 must file the Form 990 for the 2007 tax year. Those with gross receipts of less than $25,000 do not have to file forms, but beginning in tax year 2007, they will have to file a Form 990-N, or e-Postcard. By 2010, the e-Postcard threshold will be raised to $50,000 in gross receipts.

"I think this gives small and medium organizations a chance to learn the form and get used to the form. They can fill it out now, but I think this transition will be very, very helpful," said Lois Lerner, director of Exempt Organizations (EO).

Between the postcard adjustment and adjusting the EZ form threshold, "we will be making long overdue adjustments for those who have to file fuller information with us," Lerner said. "This hasn’t changed in years, but organizations have changed."

The current Form 990 will be used for the 2007 tax year, which is filed during 2008, but the newly released Form 990 will be used for the 2008 tax year, those filed in 2009. The IRS hopes to release instructions for the new 990 within the first quarter of 2008. Officials are considering releasing different portions of the instructions as they are completed, in order to receive comments from the sector.

The agency’s work since unveiling a draft 990 in June "reflects an effort to minimize the burden" for nonprofits, Lerner said. Much of the 3,000 pages of public comments received by the IRS between June and September noted concerns about how much time and effort would be required to complete the new form.

Governance was "a topic of great discussion and I think that’s really good," Lerner said. Some said the IRS had no business asking questions about governance, she added, but a "great majority didn’t feel that way," but instead suggested articulating questions in a different way. Nonprofits asked the agency to distinguish between governance issues required by statutes and those that are considered good practice.

All filers must complete the 11-page core form, while another 16 schedules must be completed depending on trigger questions about a nonprofit’s activities.

What’s gone from the draft form are metrics and fundraising ratios on the core form’s summary page. "We thought it was a good idea, but no one else did," Lerner said. By choosing some ratios and certain metrics, she said, organizations were afraid it might provide a skewed picture of a nonprofit. Instead, the summary page will include a two-year look at financial information.

"We still want to have that snapshot page of key governance and operating pages, including fundraising expenses. So what we did was put two columns on the summary page," Lerner said.

In the area of executive compensation, the draft 990 required W-2 and 1099 forms, with all other specifics in a schedule, Lerner said. "There was some pushback from medium and small organizations that wanted some of that information in the core form when doing comparables for salary and compensation, and information in retirement and health plan contributions." To keep the burden at a minimum, organizations can estimate those values, she said, though large organizations will still use the schedule.

Some trade associations didn’t think there was a compelling tax compliance issue for providing the IRS with the five highest-compensated employees, in addition to compensation of officers, directors, trustees and key employees, Lerner said.

The final Form 990 and background material explaining the changes from the current form and the draft from June are available at www.irs.gov/eo

 

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This article is from NPT Weekly, a publication of The NonProfit Times.

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