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Organizations filing Form 990 for the 2011 tax year need to review both the form and instructions to make sure questions are accurately answered and disclosures are complete.

No Surprise: More Changes to Form 990 For 2011

  • 4/17/2012

No Surprise: More Changes to Form 990 For 2011

IRS Form 990 continues to evolve and change. Since the first major overhaul in 2008, there have been additional changes and clarifications to the form each year. Organizations filing the form for the 2011 tax year need to review both the form and instructions to make sure questions are accurately answered and disclosures are complete.

The 2011 Form 990 includes changes related to foreign investments, delegation of authority, compensation, joint ventures/partnerships, and other issues.

Foreign investment

Foreign activities of exempt organizations continue to be a focus of the IRS. Organizations are required to complete additional disclosures when foreign investments are valued at $100,000 or more. Grants to foreign organizations must now include dollars paid directly to foreign organizations, as well as any organization or entity located in the United States for foreign activities. These disclosures also apply to grants to individuals located inside the United States for foreign activities.

Delegation of authority

The governance section (Part VI, Line 1a) has always required disclosures on Schedule O when the governing body of an organization delegated broad authority to an executive or committee. The form has now been modified to include this disclosure on the face of the document. There are also modifications to the sections concerning director independence, board compensation, and business relationships. In addition, the question regarding decision making requires a more in depth explanation of whether decisions are subject to approval by persons other than the governing body.

Compensation

Federal and state regulators, funders, constituents, and the public are all looking for transparency concerning executive compensation. In order to correctly complete the highly scrutinized Form 990 Part VII and Schedule J, organizations must carefully review a number of revisions and clarifications for the 2011 tax year. A close look at the instructions is a good place to start that review.

Joint venture/partnership income

The instructions for Appendix F provide guidance on including activities and items from disregarded entities and joint ventures, even though the IRS has indicated that reporting of joint venture/partnership income, expenses, and assets on Form 1065, Schedule K-1 is optional for the 2011 tax year. If an organization chooses not to report Schedule K-1 details for 2011, it should use the additional time to determine the most efficient manner to accumulate and report the details in its filing for the upcoming year.

Know what you’re getting into

It is critical that you review both the 2011 Form 990 and its instructions to ensure questions are answered accurately and disclosures are complete. Penalties may await those who fail to file an accurate and complete return.

Contact us to learn more about tax issues for nonprofits.