As you are probably aware, the Internal Revenue Service announced last year implementation of an extensively revised Form 990 (Return of Organization Exempt from Income Tax) for returns filed in 2009 for the 2008 tax year. The Service has made less substantial changes to Form 990-EZ (Short Form Return of Organization Exempt from Income Tax), but completing it will require more work than in prior years. The bottom line of these changes is that you must budget substantially more time and cost to complete either return. The common “same as last year” answer to many questions on the forms simply will not work any longer.
Let’s briefly review the Short Form changes before moving on to Form 990 itself. The good news is that organizations with gross receipts of less than $1 million and total assets are less than $2.5 million in 2008 may file the Short Form. This is only a phase-in for small organizations, however, because these numbers drop to $500,000 in gross receipts and $1.25 million in total assets in 2009, and $200,000 gross receipts and $500,000 total assets in 2010. For tax year 2007, the Form 990-EZ was simple return with a required Schedule A for public charities totaling 10 pages. Schedule B was used to report donor names for gifts in excess of $5,000. The number of pages required depended on the number and type of gifts required to be reported. For tax year 2008, I estimate that the simple return will now require 15 pages, plus the detail of contributions greater than $5,000. One more thing; the instructions specifically related to the 2007 Short Form required 12 of 68 pages in the instruction booklet for the Form 990. The 2008 Short Form instructions require 93 pages in a book of their own, plus 68 pages of instructions for the separate schedules likely to be required. That makes the total instructions pages jump to 141. These are indeed taxing times for small charitable organizations.
Now let’s turn to the Form 990. For tax year 2007, the basic Form 990 and the required Schedule A for public charities totaled 16 pages. Schedule B was used to report donor names for gifts in excess of $5,000 as with the Short Form. The number of pages required depended on the number and type of gifts. Many question on the basic Form 990 required statements to be attached to the return. A relatively simple return, therefore, may have totaled 20 – 25 pages. I estimate that for tax year 2008 the minimum return will require approximately 38 pages. I also estimate that the number of pages of instructions to complete a simple return has increased to approximately 225. Quite an increase! Plan accordingly.
The new forms are not yet available from the “Forms and Publications” section on the IRS website. The instructions for both the regular Form 990 and the Short Form 990-EZ have been released in final form. The forms themselves are still in draft form. You may download the instructions and draft forms from the main IRS website, www.irs.gov and clicking on the “Charities and Non-Profits” tab and follow the link to the forms themselves. I recommend that you do that to become familiar with the information you will be required to provide.
Whether you prepare your own return or have it prepared by a tax return preparer, someone signs the return under penalties of perjury, and declare that they have examined the return, including accompanying schedules and statements, and to the best of their knowledge and belief, it is true, correct, and complete. That means that the signer is required to know what is in the return. To that end, you may want to register for a free webcast to be broadcast by the IRS on November 4, 2008 from 2 until 3pm EST entitled “Preparing the New Form 990.” To attend, simply go to www.taxtalktoday.tv and register for the program. I recommend that you register now so that on the day of the program you simply logon and watch. I’ll see you there!
Ronnie
© Ronnie C. McClure, PhD, CPA
