IRS's Tax Talk Focuses on the New 990

Another presentation on the new 990 but from the horses mouth this time:

The Internal Revenue Service’s next Tax Talk Today Web cast on Tuesday, Nov. 4, at 2 p.m. focuses on “Preparing for the New Form 990.”

The IRS has redesigned Form 990 to reflect significant changes that have taken place in the tax law and the tax-exempt sector. Organizations and their preparers will want to tune in to learn about the new form and instructions so that they fully understand how the changes affect the filing process.

The new form will be filed in 2009 for the 2008 tax year. Organizations may also want to reassess if their internal systems need to be updated to reflect the new reporting requirements. The IRS has a special Web page on the Form 990 redesign and background documents .

Moderated by Les Witmer, panelists for November’s program are: Eve Rose Borenstein, Exempt Organizations Tax Attorney, Borenstein and McVeigh Law Offices (BAM!); Stephen Clarke, Tax Law Specialist, Rulings and Agreements, Exempt Organizations, Internal Revenue Service; Julie L. Floch, CPA, Eisner Director of Not-For-Profit Services; and Ronald J. Schultz, Senior Technical Advisor to the Commissioner, Tax Exempt and Government Entities Division, Internal Revenue Service.

Tax Talk Today is a Web cast aimed at educating tax and payroll professionals on the most current and complex tax issues. Tax professionals are encouraged to watch and submit questions. To access the Web cast at no charge, viewers can register online .

Tax professionals in need of continuing education credits are eligible to receive one CPE credit by viewing the Nov. 4 Web cast and purchasing the CE credit. Archived shows are available on the site also at www.taxtalktoday.com.

Looks to be a good presentation.

Retirement Account Changes

Does your nonprofit have a 403(b) retirement plan for its employees? If it does have you heard about all the changes taking effect for 403(b) plans? Do you know what you need to do to get ready for them?

As if getting ready for a new form 990 wasn't enough we also have to make sure our 403(b) plans are in order. The National Council of Nonprofit Associations is holding two webinars about the changes that will be presented by Bob Architect, Senior Tax Law Specialist at the IRS.

The first, a general presentation regarding the changes and how they will affect your organization, is Tuesday, October 28 at 3:00 - 4:15 pm Eastern. The second one, a comprehensive presentation regarding the changes for individuals who handle employee benefits, is Wednesday, November 12 at 3:30 - 4:45 pm Eastern. CAN Members get $10.00 off the $35.00 registration fee.

IRS Update

From the IRS comes this announcement:

IRS Sends Compliance Questionnaires to 400 Colleges and Universities
Approximately four hundred U.S. colleges and universities will begin receiving compliance questionnaires from the Internal Revenue Service in the next few days as part of the agency’s focused effort to study key areas in the tax-exempt community. The college and university questionnaire will focus on unrelated business income, endowments and executive compensation practices. The questionnaires are being sent to a cross-section of small, mid-sized and large private and public four-year colleges and institutions.

Private nonprofit universities are generally exempt from tax under Internal Revenue Code section 501(c)(3) and like state universities are to unrelated business income tax.

Click here to read the rest.

This is part of a new compliance project for colleges and universities by the IRS. Will this effort by the IRS broaden out to other 501(c)3 organizations? Probably. I think they are looking at the biggest fish first but I'll bet it is just a matter of time until more of these types of letters will be sent.
Are there any lessons to be learned here? I think two at least:

• I'd say make sure that if you are doing any activities that might generate unrelated business income you should learn the rules (link opens a PDF) that apply.
• Make sure your salaries are justified.

Probably making sure your ready in general for the new 990 reporting will help as well.

Where did all the money go?

As the Finance Guy I've been asked questions similar to this through the years. Often it comes from a board member or someone who is not too familiar with how nonprofits operate, or maybe just how organizations operate in general, and thinks that I, as my role of Finance Guy, have some ability to make money appear instead of just controlling the spending of it. I'm the first to admit that my strong suit is not fundrasing. I can put together a cash flow report and tell you how fast you will be spending your income but as far as generating contributions? Not so much.

Our sector has other professionals for that and resources out there to them get those donations. One I've read and like is The Raiser's Razor. Written by a CFRE in Dallas, Texas and covers both national and local issues. From the United Way of Dallas to how to ensure a second gift, click through and learn about what goes on in that part of the nonprofit world.

This entry is part of the Nonprofit Blog Exchange's Virtual Event #9. Check it out to see bloggers writing about other blogs.

New 990 To Do List

Even if your nonprofit is lucky enough to have a November 30 year end there is still plenty of stuff you need to be doing right now to get ready for this new reporting form. Thanks to Brian for this great list, it has been something I have been meaning to do for CAN as well as share with everybody. This is a work in progress, some things will be added as we go through this stuff but here is where it is so far:

THE NEW 990:
WHAT DO WE NEED TO DO RIGHT NOW?

Required Policies

• Conflict of interest policy
• Whistle blower policy
• Document retention and destruction policy
• Joint venture policy
• Expense reimbursement policy
• Non-standard gift acceptance policy
• Written debt collection policy (hospitals)

Practices & Procedures

• Need to prepare a written document which sets forth the procedures by which the Board of Directors will review the Form 990 before it is filed
• Document compensation reasonableness processes
• Professional fundraisers agreement
• Documentation regarding eligibility to receive grants

To Do List

• Estimate the total number of volunteers utilized during the year
• Identify any new program service activities conducted during the year
• Identify revenue and expenses for three largest program service activities
• Ensure that filing all 1099s when required to do (non-employee services in excess of $600)
• Prepare documentation to support classification of independent contractors
• Ensure that organization is preparing Form W-2G when required
• Make sure register with California Attorney General if conducting raffles and make sure undertake backup withholding if necessary
• Identify non-cash contributions in excess of $5,000 for which public charity disposed of within 3 years after receiving
• Document meetings of Board of Directors committees with authority to act
• Write-up re how satisfy public disclosure requirements
• Identify all key employees under the expanded definition
• Break out the revenue and expenses from gaming activities from the general fundraising activities
• Update Chart of Accounts (and audited financial statements) to include the expense categories listed on Part IX of the redesigned Form 990

Even if the phrase, "new 990" wants to make you stick your finger in your ears and say, "lalalalalalalalalalala" you can still go through this list and make sure your organization is more prepped than it is right now for the big event.

And please let me know if you think anything is missing from the list!

Nonprofit Leaders

For those of you who have not read Heather Carpenter's blog I do encourage you to. She writes about nonprofit leadership issues and has some great ideas.

Last week she posted a particularly interesting piece, "My NP Times Top 50: The Next Generation of Nonprofit Leaders You Should Know." It is based on the Nonprofit Times' Power and Influence top 50 nonprofit executives but it is made up of those she feels are the up-and-coming folks in the sector.

I'm honored to be on the list but mostly I'm grateful that she created it. This is a fantastic list of people who are doing interesting things to help strengthen the sector and it is great to have this opportunity to get to know them. Thanks Heather and keep up the good work.

Updated Form 990 Instructions

This IRS has announced the release of the updated and presumably final instructions for the redesigned form 990. The link takes you to a page to download the instructions to the various sections in PDF. The IRS has not yet compiled them all into the usual three column format, I think that they are easier to read at the moment. From the press release:

“We were gratified by the amount of help the IRS received from the tax-exempt community through public comments to redesign the Form 990 and revise its instructions,” said Steven T. Miller, Commissioner of the Tax Exempt and Government Entities Division. “This input helped us achieve our goal of improving compliance while minimizing burden. We will now begin working with the tax-exempt sector to help organizations complete the form and prepare for the 2009 filing season."

The IRS expects to release instructions to the 2008 Form 990-EZ, Short Form Return of Organization Exempt from Income Tax, in the next few weeks.

Happy reading! I'm going to start through these this week.

Updates From the Nonprofit Risk Management Center

Need a Refresher on Maintaining Tax-Exempt Status and Other IRS Obligations?

The IRS recently updated Publication 557 (a PDF). The updated publication provides helpful guidance on what information needs to be provided to donors to acknowledge donations, the rules regarding public disclosure of annual returns to the IRS, including the 990-T form, as well as examples of what constitutes the all-important public support needed to maintain tax-exempt status.

Frequently Asked Questions Now Available On the Center’s Web Site

Every day the Center responds to questions about risk, liability and insurance. The Center is pleased to announce that the “Advice” tab of the Center’s Web site now provides an easy link to the Center’s responses to these Frequently Asked Questions.

Why Your Financial Systems Matter

Thanks to the Independent Sector for the heads-up: From the Los Angeles Times comes a story about a local chapter of the Service Employees International Union. This story has everything -- everything that can give the public a reason to think nonprofits are poorly run or are run solely as a scam to make money for the founders: undisclosed payments made to businesses owned by family members, poor financial record keeping, lavish spending and possible misstatements of fundraising expenses.

Even if all the issues mentioned in the story are found to be justified, it is still almost a perfect example of everything you should not do. And just because something is legal doesn't mean it is ethical. Taking the time to think, "How will this look?" to the media, regulators, other nonprofits and especially the community you serve can only help your decision making, financial or otherwise. Having a strong financial system in place and people knowledgeable about those systems, as well as other nonprofit accountability measures, are key for all organizations regardless of mission or size.

990-EZ Update

Thanks to GuideStar for this bit of news. Yesterday I mentioned the 990-EZ and said that is was unchanged. Not so, at least officially. It does not look like the form itself will change but the IRS proposes to allow filers of the 990-EZ to file six of the new schedules developed for the updated 990:

1. Schedule A, Public Charity Status and Public Support
2. Schedule C, Political Campaign and Lobbying Activities
3. Schedule E, Schools
4. Schedule G, Supplemental Information Regarding Fundraising or Gaming Activities
5. Schedule L, Transactions with Interested Persons
6. Schedule N, Liquidation, Termination, Dissolution, or Significant Disposition of Assets

Details on these schedules can be found here.

Got comments about these changes? Here are the details:

Send written comments on or before September 8, 2008, to:

R. Joseph Durbala
Internal Revenue Service, Room 6129
1111 Constitution Avenue, NW
Washington, DC 20224

All comments will become part of the public record and will be
summarized or included in the IRS request for OMB approval of the
changes to the 990-EZ.