Our tax experts tackle your most frequently asked nonprofit tax questions.
1. What are the limits for filing Forms 990-N, 990-EZ and 990?
3. Is my organization required to electronically file its 990?
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Q: What are the limits for filing Forms 990-N, 990-EZ and 990?
A: Your (likely very small) organization will want to file a Form 990-N if your gross receipts are normally less than $25,000 ($50,000 for 2010).
Your organization will want to file a 990-EZ if:
2008: Your assets are less than $2,500,000 AND your gross receipts are less than $1,000,000.
2009: Your assets are less than $1,250,000 AND your gross receipts are less than $500,000.
2010: Your assets are less than $500,000 AND your gross receipts are less than $200,000.
Please note that supporting organizations, organizations with donor advised funds, or organizations that own 50% or more of a business must file Form 990.
Everyone else (those of you who do not fit the above descriptions) will want to file the full Form 990.
You can access this information here on the IRS web site.
A: Forms 990 and 990-EZ must be filed by the 15th day of the fifth month following the close of the year. If your organization has a calendar year, its 990 will be due May 15th. If your organization has a fiscal year, you have four and a half months to file, so if your organization had a June 30 year end, its 990 would be due November 15.
An organization can request an extension to file. The first extension is an automatic three month extension and is filed on page one of Form 8868, Application for Extension of Time to File an Exempt Organization Return. The organization can also request an additional three month extension, but in this case, it must be approved by the IRS. Second extensions are requested on page two of Form 8868. Second extensions must provide a reason for the additional three month request. If the extension is turned down, the organization must file the return by the original due date or 10 days from the date of the letter denying the second extension.
Q: Is my organization required to electronically file its 990?
A: All organizations that have total assets of $10 million or more at the end of the tax year and file 250 or more returns with the IRS during the year are required to e-file their 990. The 250 count for the number of returns is generally based on any forms containing the organization’s employer identification number. This includes each individual W-2, 1099, and payroll tax returns. If an organization is required to file a return electronically but does not do so, the organization is considered to have failed to file its return, even if a paper return was filed.
Q: For the new 990 questionnaire, whom do I list as a “highly paid individual”? And furthermore, under the “Compensation” tab it says to list all officers. Who are considered the “top management” and “top financial” people? Does that mean the Financial Director or the Board Treasurer?
A: You should consider any employee earning over $100,000 annually a “highly paid individual” (list them in Part 2 of the “Compensation” tab). However, all officers and directors should be listed in Part 1 no matter their amount of compensation. Additionally, if your organization is paying compensation to any former officers or directors, those individuals should be listed in Parts 3 and 4.
The IRS defines the “top financial official” as “the person who has ultimate responsibility for managing the organization’s finances.” You should list your Board Treasurer if they fit that description. You should also include your organization’s Chief Financial Officer if you have one. Additionally, the “top management official” is the person who has ultimate responsibility for implementing the decisions of the governing body or supervising the management, administration, or operation of the organization. This would include the President, Chief Executive Officer, and/or Executive Director.
Q: Does the provision that the Form 990 be reviewed by voting members prior to filing refer to our Executive Committee or the full Board of Directors?
A: The 990 needs to be provided to all voting members of the board before the return is filed to be able to answer “yes” to the question on the Form 990. You can provide the copy in paper or electronic format. You are also not required to verify that they actually reviewed the 990 before it was filed.
Q: What needs to go under the “If 501(c)(3), what is ‘Public status’ of entity” column of the Schedule R in the 990 schedules file?
A: The public status box is completed on the questionnaire when the organization is reporting transactions with related charitable organizations. The form is looking for the public status number the related entity checks on the Schedule A page one. The number can be 1 through 11(d). If the related entity is a supporting organization, the organization completing the questionnaire must also indicated the type of supporting organization. There are 4 types. For information regarding the different types of supporting organizations, please see the glossary we provide.
The organization would enter the number corresponding to the box that the related charitable entity checks on its Schedule A. Example: If the related entity is a school. The organization would enter “2” in the public status box on the questionnaire. If the related charitable entity was charity that receives must of its support from the general public, the organization would enter “7” in the public status box on the questionnaire.
If the related entity is a private foundation, the organization should enter “PF” in the public status box.
Q: I have a question about donated art: is there a dollar threshold for this or does every piece of “art” that is donated to our auction need to be listed? Is every item and service donated to our auction suppose to be listed on Schedule M?
A: There is a minimum threshold of $25,000 in noncash donations recorded on the books before you are required to complete the form. Once you are required to complete the form, there is no minimum threshold for reporting the separate items on the Schedule M.
We do not need the detail of each item of noncash items donated to the organizations. We just need them by type. Example: say the organization received seven pieces of art from five different donors for an auction. You will need to provide us with the number of pieces of art donated (seven) and the revenue recognized on the books for those seven pieces (say $15,000). We do not require to know the value of each piece. You should keep that information for the organization’s records.
If the organization is receiving stock, we do not need to know the number of shares donated. We will just need to know how many different contributions of stock were made during the year. This is different than the donation of other noncash items. Example: the organization receives 1,000 shares of Microsoft from a donor. This would be counted as one contribution instead of 1,000 where the art donated above would be considered seven contributions.
If the organization received donated items for the auction, separate from the items sold at auction (food, floral centerpieces, etc.), please show these items in the “other” section on the schedule and please describe the items donated. Example: food for auction, $1,500, wine donated for auction, $500, etc.
Please do not include the donation of services or use of facilities in these amounts on the Schedule M. They are not included in the noncash donations that the IRS is looking for. The total amount of in-kind donations are reported in a separate section of the form.
Q: What employees should we report as “former” highly compensated employees in Part III of the compensation schedule? How about “former” officers or key employees? What individuals do we report as “former” directors/trustees in Section IV of the compensation schedule?
A: An individual must meet the following four conditions to be considered a “former” highly compensated employee who would need to be disclosed in Part III on the compensation schedule assuming the organization’s tax year ends on December 31:
1. The individual was not an employee of the organization at any time during the organization’s tax year.
2. The individual was reported (or should have been reported as a highly compensated person in the past according to instructions at the time) on the organization’s Form 990, 990-EZ or 990-PF on any of the five prior years as one of the five highest compensated employees.
3. The individual’s reportable compensation exceeded $100,000 for the organization’s tax year including compensation from related organizations.
4. The reportable compensation would place the individual among the organization’s current five highest compensated employees if they were a current employee.
To be reported as a “former” director, officer, trustee, or “key” employee, they must meet both of the following requirements:
1. The organization reported (or should have reported applying instructions in effect for the year) an individual on the organization’s Form 990, 990-EZ, or 990-PF, for any of the five previous years as an officer, director, trustee, or key employee.
2. Former directors or trustees are listed if their reportable compensation (W-2 or 1099) for the calendar year within the organization’s tax year was greater than $10,000 (for the organization or related organizations). Former officers or key employees are listed if their reportable compensation exceeds $100,000 for the calendar year ending with or within the organization’s tax year.
For “former” directors, officers, trustees, or key employees, they would must be reported if they continue to work for the organization (or related organization) in a lesser capacity from their prior position.
For fiscal year organizations, the organization must use the reportable compensation (W-2 or 1099) for the calendar year ending within the organization’s fiscal year. Example, if the organization’s fiscal year ends June 30, 2009, the organization must use the W-2 or 1099 amounts from the calendar year 2008.
Q: Our company is incorporated in Oregon but we reside and file in Washington. Should I list Oregon or Washington as the “State of Legal Domicile”?
A: For corporations, the State of Legal Domicile is the State of Incorporation. For others, like trusts, the State of Legal Domicile is the State whose law governs the organization’s affairs.
