Revised Form 990: A Line-by-Line Preparation Guide

A line-by-line preparation guide to the completely new and revised Form 990 for nonprofit organizations The accurate and complete preparation of Form 990—the information return that must be filed annually by most types of tax-exempt organizations—is a key factor in maintaining public image and fundraising capabilities. The newly redesigned Form 990 was released in December 2008 with significant revisions to the initial June 2007 draft. Preparation of the new return will require tax-exempt organizations to gather extensive new information about their activities for disclosure on the new form beginning with their 2008 tax year. In Revised Form 990: A Line-by-Line Preparation Guide, authors Jody Blazek—who with other AICPA Task Force members was instrumental in effecting changes to the original IRS draft of the form—and Amanda Adams, provide step-by-step and line-by- ine analysis and preparation guidelines for nonprofit professionals and nonprofessionals alike charged with preparing and submitting the form. This hands-on workbook walks you through the process of producing an annual report to the IRS that demonstrates continued qualification for exempt status for a nonprofit organization, explaining the information requested page by page and part by part. It addresses the issues and challenges for each part, particularly the new schedules. As each part is explained, the authors suggest when certain answers have negative consequences. Guidance is provided for functional expense reporting and generally accepted accounting principles for reporting revenues. A good discussion of the differences between book and tax reporting and records needed to accurately display financials for tax purposes is included. The Form 990-PF and Form 990-T are also examined.

Table of Contents:
Preface ix Acknowledgments xiii About the Authors xv Chapter 1: Redesigned Form 990 1 § 1.1 History of Redesign Project 3 § 1.2 Highlights of Revised Form 990 5 § 1.3 Filing of New Form Delayed for Many 9 § 1.4 Find Out Why Organization Qualifies for Tax Exemption 10 § 1.5 Who Is Required to File What 11 § 1.6 Filing for New Organizations 12 § 1.7 Who Is Not Required to File 12 § 1.8 Filing Deadline and Fiscal Year 13 § 1.9 New Form 990-N (e-Postcard) 13 § 1.10 Electronic Filing of Returns 14 § 1.11 Group Returns and Annual Affidavit 15 § 1.12 Public Inspection of Forms 990 and 1023/1024 16 Notes 17 Appendix 1A: 6/14/07 Draft of Core Form 19 Appendix 1B: BV Suggested Revisions 29 Appendix 1C: Form 990-EZ 30 Chapter 2: Good Accounting Makes a Good 990 35 § 2.1 Tax Accounting Methods 37 § 2.2 Professional Accounting Standards 38 § 2.3 Chart of Differences Between GAAP and IRS Rules 42 Notes 45 Chapter 3: The Core 47 § 3.1 2008 Form 990 Core 47 § 3.2 Part I Summary 48 § 3.3 Part II Signature Block 50 § 3.4 Part III Statement of Program Service Accomplishments 50 § 3.5 Part IV Checklist of Required Schedules 53 § 3.6 Part V Statements Regarding Other IRS Filings and Tax Compliance 56 § 3.7 Part VI Governance, Management, and Disclosure 64 § 3.8 Part VII Compensation of Officers, Directors, Trustees,Key Employees, Highest Compensated Employees, and Independent Contractors 73 § 3.9 Part VIII Statement of Revenue 81 § 3.10 Part IX Statement of Functional Expenses 88 § 3.11 Part X Balance Sheet 95 § 3.12 Part XI Financial Statements and Reporting 97 Notes 97 Appendix 3A: Transactions with Interested Parties Questionaire 100 Chapter 4: Form 990, Schedules A through R 103 § 4.1 Schedule A 103 § 4.2 Schedule B 120 § 4.3 Schedule C 125 § 4.4 Schedule D 132 § 4.5 Schedule E 146 § 4.6 Schedule F 149 § 4.7 Schedule G 155 § 4.8 Schedule H 160 § 4.9 Schedule I 165 § 4.10 Schedule J 170 § 4.11 Schedule K 173 § 4.12 Schedule L 174 § 4.13 Schedule M 182 § 4.14 Schedule N 188 § 4.15 Schedule O 192 § 4.16 Schedule R 195 Notes 200 Appendix 4A: State Unified Registration Statement 204 Appendix 4B: Interested Party by Part and Type 223 Chapter 5: Form 990-T: Exempt Organization Business Income Tax Return 225 § 5.1 What Is Unrelated Business Income? 226 § 5.2 Exceptions and Modifications from Tax 228 § 5.3 Unrelated Debt-Financed Income 231 § 5.4 Who Files Form 990-T? 233 § 5.5 Due Dates, Tax Rates, and Other Filing Issues 234 § 5.6 Normal Income Tax Rules Apply 236 § 5.7 The Unique Design of the 990-T 238 § 5.8 Categories of Deductions 243 § 5.9 Cost Allocations 246 § 5.10 In-Kind Donations 248 Notes 248 Appendix 5A: Analysis of Corporation versus Trust 990-T Issues 252 Chapter 6: The Private Foundation Return 253 § 6.1 Successful Completion of Form 990-PF 253 § 6.2 The Part I Columns 255 § 6.3 Line-by-Line Instructions for Revenues 257 § 6.4 Line-by-Line Instructions for Expenditures 261 § 6.5 Part II: Balance Sheets 265 § 6.6 Part III: Analysis of Changes in Net Worth or Fund Balances 266 § 6.7 Part IV: Capital Gains and Losses for Tax on Investment Income 267 § 6.8 Reports Unique to Private Foundations 268 § 6.9 Part V: Reducing the Tax Rate 268 § 6.10 Part VI: Calculating the Excise Tax 269 § 6.11 Part VII-A: Proof of Ongoing Qualification for Exemption 270 § 6.12 Part VII-B: Questions Seeking Evidence That No Sanctions Apply 275 § 6.13 Part VIII: Information About Officers, Directors, Trustees, Foundation Managers, Highly Paid Employees, and Contractors 276 § 6.14 Part IX-A and B: Summary of Direct Charitable Activities and Program-Related Investments 278 § 6.15 Part X: Minimum Investment Return 279 § 6.16 Part XI: Distributable Amount 279 § 6.17 Part XII: Qualifying Distributions 280 § 6.18 Part XIII: Undistributed Income 280 § 6.19 Part XIV: Private Operating Foundations 282 § 6.20 Part XV: Supplementary Information (Lines 1–2) 282 § 6.21 Part XV: Grants and Contributions Paid During the Year or Approved for Future Payment (Line 3) 283 § 6.22 Part XVI-A: Analysis of Income-Producing Activity 285 § 6.23 Part XVII: Information Regarding Transfers to and Transactions and Relationships with Noncharitable Exempt Organizations 286 Notes 287 Index 289

About the Author :
JODY BLAZEK is a partner in Blazek & Vetterling, a CPA firm focusing on tax and financial planning for exempt organizations and the individuals who create, fund, and work with them. BV serves over 400 nonprofit organizations providing financial reports and tax compliance and planning services. She is the author of six books in the Wiley Nonprofit Series: Nonprofit Financial Planning Made Easy; IRS Form 1023 Preparation Guide; IRS Form 990 Tax Preparation Guide for Nonprofits; Tax Planning and Compliance for Tax-Exempt Organizations, Fourth Edition; Private Foundations: Tax Law and Compliance, Third Edition; and The Legal Answer Book for Private Foundations, the latter two volumes coauthored with Bruce R. Hopkins. AMANDA ADAMS is a tax manager at Blazek & Vetterling with extensive experience in public charities and also private foundation tax matters through her work with Foundation Source. She is a member of the American Institute of Certified Public Accountants, the Texas Society of Certified Public Accountants, and the Houston Chapter of CPAs.