Understanding Tax-Exempt Reporting
The IRS Form 990 is an annual reporting return that certain federally tax-exempt organizations must file with the IRS. It provides information on the filing organization’s mission, programs, and finances.
Form 990 has been around for more than 50 years. The first 990 was filed for tax years ending in 1941. This comparatively simple two-page form included only three yes/no questions, an income statement, and a balance sheet (although some line items required attached schedules). For example, individuals paid a salary of $4,000 or more were required to be listed on a schedule showing their name, address and amount paid. Similarly, contributions exceeding $4,000 received from any one person were required to be itemized.
By 1947, the form (including instructions) had reached four pages, although some portions applied only to certain types of organizations such as farmers’ cooperatives. The required financial information was far more extensive than that of the first 990. Although the income statement now contained a separate line item for compensation of officers, the requirement of a separate schedule for the “highly compensated” seems to have vanished. The requirement for a list of large contributors remained, but the reporting threshold for individual contributions was reduced to $3000. By this time, a group return procedure had also been implemented. The early returns were continuous use forms; a new form was not published each year.
In 1976, the Form 990 itself consisted of two pages plus three and one-half pages of instructions. Schedule A consisted of four pages plus four pages of instructions. By 2000, the form was up to six pages for the 990 itself, six pages for Schedule A, at least two pages for Schedule B (including instructions), and a separate 42 page instruction book.
The Form 990 was redesigned in 2008, and now consists of an 11-page core form and 16 schedules designed to report information from organizations that conduct particular activities. The Form 990 had not been significantly revised since 1979 and it was universally regarded as needing major revision. It has failed to keep pace with changes in the law and with the increasing size, diversity, and complexity of the exempt sector.
The IRS revised the format and content of the form based on three guiding principles: enhancing transparency, promoting tax compliance, and minimizing burden on the filing organization. Some of the major features include a summary page, a governance section, more extensive reporting of compensation and relationships with other entities for some organizations, and new reporting for tax-exempt bonds, foreign activities, non-cash contributions, and hospitals.
Contact our Not-for-Profit Tax Team
Is your non-profit organization required to file a Form 990? Not sure what’s expected of you or how to comply with this requirement? Contact Rea & Associates. Our Ohio non-profit tax team will take care of your filing, so you can take care of your mission.
Contact Rea’s not-for-profit team for assistance with maintaining your tax exempt status or for any other non-profit accounting needs. Rea’s not-for-profit team offers a full range of financial services for non-profits including: 990 preparation, audits, outsourced accounting, and QuickBooks support. We’ll focus on the paper work; you focus on your good work.