The How to’s of your 990

The How tos of your 990

The How tos of your 990Learn critical information about the 990 and how to read and work with the document.

1Randall Biddix, CPAMARKOWSKI & COMPANY, CPAS2880 SPRING ARBOR ROADJACKSON, MICHIGAN 492032OverviewEssential matters to be aware of

Ways to gain efficiency through overlap with tax work

First Major redesign in nearly 30 years3Three Guiding PrinciplesTransparency

Compliance

Accountability4Who Must FileMost organizations exempt from income tax under section 501(a) must file an annual information return or submit an annual electronic notice depending upon the organizations gross receipts and total assets.5Which Form To File990-NAn organization whose gross receipts are normally $50,000 or less.

990-EZ$200,000 of Gross Receipts for the tax year or $500,000 of total assets.

990All others not outlined above.6Revised Form 990Core Form12 Pages.Applies to all organizations filing the form.

16 SchedulesA through O and R.Only file schedule if organization meets certain criteria.7Why the revision?Attempts to incorporate many of the same governance principles and transparency best practices introduced to the for-profit world through the Sarbanes-Oxley Act in the aftermath of the Enron scandal.

Attempt by the federal government to restore confidence in the governance of the exempt organization sector, particularly charities.8Governance, Management and TransparencyDoes the organization have written policies on conflicts of interest, whistleblowers and document retention?

How are the policies enforced and disclosed to the public?

How independent are the voting members of the board?9 Are minutes taken at board and committee meetings documenting actions take?

Will the board review the form 990 before it is signed and submitted to the IRS?

What is the process for reviewing and approving executive compensation?10Article on IRS website:well-governed organizations are more likely to be transparent with regard to their operations, finances, fundraising practices, and use of assets for exempt and unrelated purposes

It is clear that the IRS believes these policies are necessary in order to operate an organization effectively and efficiently and that not having these policies in place reflects poorly on the organizations governance from top to bottom.11Core Form 990 StructurePage 1 Summary Schedule and Signature blocksPage 2 Description of ActivitiesPages 3 & 4 Questions for Addl SchedulesPage 5 Compliance QuestionsPage 6 Governance/Policy/DisclosurePage 7 & 8 CompensationPage 9 & 10 Detail Revenue and ExpensePage 11 Balance SheetPage 12 Reconciliation of Net Assets12SchedulesA Public CharitiesB DonationsC Political and LobbyingD FinancialE SchoolsF ForeignG Events & GamingH - HospitalsI Domestic grantsJ CompensationK BondsL Interested PersonsM Non-CashN DiscontinuedO OtherR Related Organizations

13FundamentalsMateriality is an audit concept thresholds are for taxGross receipts and asset thresholds determine which form is required.Each schedule has a thresholdQuestions within the form or schedule may have a threshold

Three flavors of Form 990Public Charities (990, 990EZ, 990N)Private Foundations Form 990PFUnrelated Income 990T

14 Generally no consolidation Form 990 is different tax ID #Affiliated organizations under a group exemptionMust deconsolidate financial informationDeconsolidating entries inform on Schedule RPart IV Q 12 Audit Question Separate vs. Consolidated

15PREPERATION OF FORM 990(do not prepare forms in order)Page 1 Header & Line 1 and 6 of Summary:Form is for the year the tax year beganDo not complete Line G at this timeType of EntityYear of FormationState of legal domicile16Schedule R - EntitiesIdentification of Disregarded entities, Taxable and Exempt Related Organizations & Related and Unrelated PartnershipsThreshold reduced to 5% of the organizations activities in a joint venture(Part VI)Added check the box section to disclose type of transactionsPart V>$50K Threshold (organization or transaction type?)17Identify Directors, Trustees, Officers and Key EmployeesPart VII Compensation (For 990 purposes, top management official and top financial official are officers5 Highest paid with greater then $100K (including related org) (Box 5 of W-2, Box 7 of 1099, or actual amount paid)Former Dir/Trus/HCE/KE paid greater then $100KFormer Director/trustee paid greater then $10K as a former Director or TrusteeAll calculated on a calendar year even if fiscal year organization

18Who is a Key EmployeeReportable compensation exceeds $150,000 or highest paid employee if compensation is less than $100K

And, Manages a discrete segment or activity, or has authority to control 10% or more of activities, assets, income or expenses of the organization

19Part VIII Statement of RevenueAll revenue including contributions on one pageElimination of UBI and exempt codesBusiness code for exempt revenueQuestion 8 & 9, $15K threshold fore filing Sch GMemberships split by typeTrack certain revenue streams (Part III)

Note Record Total Receipts on Page 1 Line G20Part IX Functional ExpensesComplete Columns B thru DQ3 separate reporting of foreign grantsQ11 report non-employee servicesUBI tax must be listed on line 24 Other ExpensesQ24f Should attempt to keep below 10% of total expenses21Part X Balance SheetSeparates assets, liabilities and net assets into reporting line items.Land, Building and equipment must agree to Sch DReceivables and Payables from related parties must agree with Sch LReport Net Assets on line 27 thru 29 if the organization follows SFAS 117, or Line 30 thru 32 if the organization does not follow SFAS 117. (Statement of Financial Accounting Standards)22Public Support Schedule ASplits two types of public support (Complete Part I; either Part II or Part III; and Part IV if necessaryReport on a 5 year basis including the current yearFacts and Circumstances on face of formInclude prior year support % to make normal relevant23IRSs review of Revenue(Facts and Circumstances)10% minimum public supportContinuous bona fide fundraising programDiverse sources of supportPublic boardOngoing provision of services or facilities to the publicMember organizations have dues rates that make the organization accessible to the publicActivities of the organization have broad public appeal24Schedule of Contributors Schedule BFile if during the year the organization received $5,000 or more from any one contributor.

Special rules for 501(c)(3) If the organization meets the 331/3% support test only report contributors of $5,000 or more if it is greater than 2% to total contributions, grants, gifts, etc.25Supplemental financial Statements Schedule DDetails previously only in footnotes to audited financial statementsIncludes the reporting on:Donor advised fundsConservation EasementsCollections of art, historical treasures, etc.Escrow and Custodial ArrangementsEndowment FundsLand, Buildings, and EquipmentInvestments Other SecuritiesInvestments Program relatedOther AssetsOther LiabilitiesReconciliation of Form 990 to Financial Statements:Net AssetsRevenueExpenses

26Fundraising or Gaming Activities Schedule GFundraising Activities

Fundraising Events and/or GamingReport revenue and expensesName and address of person who prepares the gaming books and records.27SummaryBe aware of which form is applicableObtain the new information that is requiredPay attention to form thresholdsReasonable efforts StandardCoordinate related party disclosuresAction items policies and proceduresGoverning Body must be involved28Additional topics for discussionUnrelated Business Income Form 990T Income from a trade or business regularly carried on by an exempt organization and not substantially related to the performance by the exempt organization of its exempt purpose or function.Examples of unrelated income:Selling of membership mailing listsCertain Advertising SalesSelling of greeting cardsRental Income from personal property29Exclusions from Unrelated Trade or Business IncomeVolunteer workforceSelling donated merchandiseExchange or rental of member listsRental income from real propertyDividends, interest and other investment income30Accounting IssuesDo you record membership dues that have been billed but not paid?

How do you record funds in your name in an endowment fund held by a Foundation?

How do you record donated property or services?31Questions?????32