2012 IRS Form 990 Whats New - Whats Important

2012 Form 990: Whats New, Whats Important
February 26, 2013 Deborah G. Kosnett, CPA
IRS Highlights: 2012 EO Annual Report/ 2013 Workplan
Copyright Tate & Tryon 2013
2012 Workplan Results: Governance

Examined 10,743 EO returns Completed Governance Check Sheets analysis for charities under audit Compliant charities were most likely to:
Have a written mission statement - Use comparability data for compensation decisions - Have controls over use of charitable assets - Have the entire Board review the 990 before filing
-
2012 Workplan Results: Auto Revocation

More than 450,000 organizations have lost exempt status About 30,000 have applied for reinstatement IRS offered transitional relief for small orgsreduced fees, etc. through Dec. 31 IRS launched Select Check web site in 2012: info on revocation, filings, eligibility to receive deductible contributions IRS also routinely sends out compliance check notices to intermittent non-filers
3 Copyright Tate & Tryon 2013
2012 Workplan Results: Outreach Initiated virtual workshops - What You Need to Know About Automatic Revocation of Exemption Made extensive use of introductory workshops, webinars, e-newsletters 2013: In-person outreach for larger groups; technology and virtual content for smaller orgs
2012 Workplan Results: Exam Process Info
Launched web pages that provide centralized information on the EO exam process:
- Why
an org might be selected for review - Different types of exams (field, correspondence, etc.) - What to expect during an exam - Taxpayer rights - Info on Fast Track Settlement
www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Audit-Process
2013 IRS Workplan: Form 990 Compliance
The IRS uses the Form 990 responses to select returns for examination, so a complete and accurate return is in your best interest.
-- IRS FY 2013 Workplan

As we examine organizations selected through this data-driven approach, we find that the Form 990 responses of some organizations do not always accurately reflect their activities. If those organizations had been more careful in completing their returns, they might not have been identified by our indicators or selected for examination.
-- IRS FY 2013 Workplan

Compensation transparency IRS will examine 200 orgs
-
Focus on high gross receipts / very low total compensation
Unlawful political campaign intervention IRS will evaluate 300 cases for possible examination
-
IRS will also evaluate whether Forms 1120-POL should have been filed
Unrelated business income IRS plans to examine orgs with high gross UBI / no taxable income Charitable spending initiative IRS sources/uses of charitable funds exams will focus on medium/large orgs
-
Focus on high fundraising income/low fundraising expense

2013 IRS Workplan: Governance

501(c)(3) and (4) orgs will be examined for governance practices
Based on 2012 findings - IRS checksheet will look for additional relevant factors or practices
-
285 orgs that in 2009 reported a significant diversion of assets IRS will look at their before/ after governance practices
2013 IRS Workplan: 512(b)(13) Study

The Pension Protection Act of 2006 made some changes to this code section transactions with controlled entities PPA 2006 mandated Treasury to report on administration of the changes and make recommendations IRS EO Division is starting to analyze data gathered from 2,000 checksheets No info on when this might be complete
2013 IRS Workplan: Employment Tax Compliance
IRS is in its 3rd year of an employment tax compliance research project (National Research Program (NRP)) EO has examined employment tax forms filed by exempt orgs in 2008 2010 For 2013, EO will finish its analysis and provide data to the IRS NRP for further work
2013 IRS Workplan: Intl Charitable Activities

In 2012, EO looked at a sample of orgs that reported foreign bank accounts. Findings:
Failure to file FBAR reports - Inadequate recordkeeping - Lack of discretion and control over foreign funds - Failure to file/incorrect filing of employment tax returns
-
For 2013, IRS will focus on orgs with high amounts of foreign grants IRS will also continue its Gifts-in-Kind exams, focusing on excessive comp/limited charitable activity
2013 IRS Workplan: Group Rulings

IRS is currently sending out a Group Rulings Questionnaire to > 2,000 randomly selected central organizations
2011 Advisory Committee to TE/GE report questioned utility of group exemptions - Large numbers of subordinates have been auto-revoked
-
Questionnaire seeks to examine central org/ subordinate relationships and reporting New web page on group rulings:
www.irs.gov/Charities-&-Non-Profits/Group-Exemption-Rulings-andGroup-Returns
2013 IRS Workplan: 990-N Misfilers

Since 2008, IRS has found numerous 990-N erroneous filings:
Orgs that are too large to file - Supporting organizations (501(a)(3)s cannot file a 990-N) - Orgs that filed both 990-N and another 990 (dual filers)
-
> 200 ineligible orgs that filed 990-N will be notified of automatic loss of exempt status IRS will examine > 200 dual filers to determine future filing requirements
14
2013 IRS Workplan: Self Declared Exempt Orgs
501(c)(4)/(5)/(6) orgs can declare themselves exempt without asking for determination IRS will send out a questionnaire to 2010/2011 self-declarers to determine correctness of classification and compliance IRS is no longer granting automatic retroactive exemption to Form 1024 filers! (Rev. Proc. 2013-9)
-
IRS is adopting the 27-month rule that now applies to Form 1023 filers
15
2013 IRS Workplan: Miscellaneous

Plain language writing courses will be extended to tax law specialists in Rulings and Agreements Auto-revocation IRS will update Automatic Revocation List monthly IRS will be developing new communications and materials designed to meet the tax needs of small exempt organizations IRS will debut an interactive, educational online version of Form 1023
Form 990 2012: Form and Instruction Update
17
Whats New for 2012 Core Form

Part IV - Grants or other assistance to domestic orgs or individuals that are designated for foreign organizations must be reported on Schedule F Part VI instructions for Question 3 clarify the information to be provided on Schedule O: name the management company, describe services, list ODTKEs compensated and amounts compensated. Part VI an other box for Line 18 has been added (disclosure of 990/990-T/1023/1024)
18

Part VII you now must include average hours/week for related orgs Section A provides instructions for reporting self-insured medical plan benefits (page 31) Section B, independent contractors insurance providers should not be reported (nor public utilities, either)

Part VIII You are no longer required to report revenue from JVs and partnerships on a K-1 basis Part VIII a 501(c)(3) organization must treat all S corporation income as UBI; gain on disposition of S corporation stock is also UBI (512(e)) Part VIII if you get any Forms 1099-K: report on appropriate line based on nature of the payments (i.e., contribution, income from sale of inventory)
-
Keep 1099-K copies with your records
20

Part IX Line 3, grants and assistance must now include grants to U.S. orgs or individuals that are designated for foreign orgs or individuals Part IX new Line 11g: if other fees > 10% of total expenses, then detail on Schedule O
21

Part IX You are no longer required to report assets from JVs and partnerships on a K-1 basis Part IX Line 6: receivables reported here trigger Schedule L disclosure

Part XI new lines (because Schedule D reconciliation is gone) Part XII simple reformatting of compiled/ reviewed/ audited statements question
23
Whats New for 2012 Glossary

Disqualified person definition clarifies that if a 5year disqualification period ends within the orgs tax year, it may treat the person as disqualified for the entire year Grants and other assistance no longer includes program-related investments (Schedule F) Professional fundraising services now includes preparation of applications for grants or other assistance.
Whats New for 2012 Miscellaneous

If an organization accepts a contribution in the name of one its programs, the donor acknowledgement should indicate the organizations name not the programs name IRS reminds filers not to include social security numbers on 990 or 990-EZ Form 990-EZ, Part IV officer/director address no longer required
25
Whats New for 2012 The Schedules

Schedule A disclose only monetary support in 11h(viii):
Monetary support includes payments to or for use of members of charitable class benefited by the supported org; payments to other SOs - Describe non-monetary support in Part IV

Schedule B accrual method organizations reporting pledges of non-cash property must check the non-cash box and fill out Part II, even if property not received by year-end Schedule C special focus coming up Schedule D Part IX, Reconciliation, has been eliminated Schedule D donor-advised funds reportable in Part I are not limited to funds or accounts that meet the GAAP funds definition Schedule D The FIN 48 footnote needs to be reported regardless standards used to determine (FIN 48, ASC 740, IFRS, or other) Schedule F special focus coming up

Schedule G for Part II, Line 2, all contributions related to a fundraising event should be reported, not just charitable contributions Schedule H hospital-related schedule, N/A Schedule I removed a checkbox, nothing otherwise Schedule J new example of how to report value of benefits from a nonqualified benefit plan Schedule K significant new questions regarding sales and dispositions of bond-financed property, rebates, etc.
29
30

Schedule L special focus coming up Schedule M definition of a qualified organization for purposes of a qualified conservation contribution Schedule N revision of significant disposition of net assets to exclude grants or other assistance made in the ordinary course of exempt activities Schedule N organizations winding up but not yet terminated should not fill out Part I, but may need to complete Part II
31

Schedule R new section in instructions regarding what VEBAs need to report Schedule R 3 more examples of indirect control for schedule reporting purposes Schedule R Part IV now has a 512(b)(13) controlled entity column Schedule R Part V has a new item: Dividends from related organizations
32
33
Form 990 2012: Focus on Schedule C
34
Schedule C What Are the Trigger Questions?
Identical to 2012
35
Schedule C Political Activity Reporting
36
Part I-A for (Almost) Everyone
Report both direct and indirect political campaign activities

Line 1: requires a Part IV narrative description even if only activity is through a connected PAC - Line 2: Correctly-handled PAC contributions are NOT reported here; everything else is Line 3: Report volunteer hours for the organizations own political activities not those of connected PAC
37
Part I-B Sec. 501(c)(3) ONLY
The term political expenditure means any amount paid or incurred by a section 501(c)(3) organization in any participation in, or intervention in (including the publication or distribution of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. 4955(d)(1)
Part I-B asks about excise taxes imposed by 4955 in connection with political expenditures So, Part I-B is never filled out unless a 501(c)(3) has done something it shouldnt have!
38
Part I-C Everyone BUT Section 501(c)(3)
Report both political contributions shunted to your PAC and your own political expenditures, if any
39
Part II-A Lobbying under Section 501(h)
40
501(h) When Things Go Somewhat Wrong
$1,100,000 excess lobbying expenditures in 2011 ONLY
41
501(h) When Things Go Horribly Wrong!
$75,000 in excess grassroots expenditures in TOTAL
42
What Happens When a 501(c)(3) Fails 501(h)?

It does NOT get 501(c)(4) status (even though it might otherwise qualify) It becomes a taxable organization (usually a corporation) GCM 39813: tax treatment of
-
Gross receipts of trade/business activities - taxable Income from investment and other formerly excluded activities taxable Good faith contributions generally nontaxable under 102 Donors may be subject to gift tax
43
Theres Nothing Like Self-Assessment . . .
Part II-B directly asks if lobbying causes the organization to fall out of 501(c)(3)
44
Part III Section 501(c)(4), (5), (6) Lobbying
"Dues payments, contributions or gifts to XYZ Association are not tax deductible as charitable contributions for federal income tax purposes. However, they may be deductible as ordinary and necessary business expenses subject to restrictions imposed as a result of XYZ's lobbying activities as defined by the Budget Reconciliation Act of 1993. XYZ estimates that the nondeductible portion of your 20XX dues -- the portion that is allocable to lobbying -- is ___%.
45
Form 990 2012: Focus on Schedule F
46
Focus on Schedule F
2012 updates:
Expenditures and investments in a single region are to be reported on separate lines - Foreign program-related investments go in Part I, but not Parts II and III - Grants and other assistance to US organizations or individuals destined for foreign organizations are reportable in Parts II and III
-
. . . To or for the use of foreign organizations, foreign governments, foreign individuals, and U.S. individuals or entities for foreign activity . . .
Make Sure You Are Capturing All Expenses

Expenditures include salaries, wages, and other employment-related costs paid to or for the benefit of employees located in the region; travel expenses to, from, and within the region; rent and other costs relating to offices located in the region; grants to or for recipients located in the region; bank fees and other financial account maintenance fees and costs; and payments to agents located in the region. Report expenditures based on the method used to account for them on the organization's financial statements, and describe this method in Part V.
48
A Few Details . . .
Foreign investments held through a domestic entity are not reportable (domicile is not foreign) You may round off both investments and expenses to the nearest $1,000 For 2012, you may skip allocating indirect expenditures to foreign activities if you dont already separately track them For grants and other assistance do not include salaries or payments to independent contractors, or payments to affiliates that are not separate legal entities Even if you have no expenditures for an activity, you must report the activity in Part I if you derived more than $10,000 in revenue from its operations
Foreign Forms Questions
50
Dont Slide Over the Boycotting Countries Question!
A boycotting country is:

-
Any country that is on the list maintained by the Secretary of the Treasury under 999(a)(3).
The most recent list (August 2012) includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, UAE, and Republic of Yemen.
Any other country in which your organization (or controlled group of which your org is a member) has operations and of which you know, or have reason to know, requires any person to cooperate with or participate in an international boycott. There are some filing exceptions, to read the instructions to Form 5713 carefully!
Form 990 2012: Focus on Schedule L
52
Focus on Schedule L
New columns in Parts I, II, III Part I asks for amount of tax incurred by formerly imposed on Part II emphasis placed on amounts reported in Part X (balance sheet), lines 5, 6, 22 Part IV clarification that bank deposits/ withdrawals are not reportable if made in ordinary course of business
Interested Person Includes for Part IV:

An entity (other than a section 501(c)(3) organization, a section 501(c) organization of the same subsection as the filing organization, or a governmental unit or instrumentality) more than 35% owned or controlled, directly or indirectly, individually or collectively, by one or more current or former officers, directors, trustees, or key employees listed on Form 990, Part VII, Section A, or their family members.
54
Note that disclosure is required only if there are reportable transactions. But between related exempt orgs, there usually are! See pages 3 and 4 of Schedule L instructions.
How To Determine More than 35% Control
For purposes of this Part IV, a nonprofit organization is 'more than 35%' controlled when more than 35% of its directors or trustees either (a) consist of interested persons of the filing organization, or (b) serve as directors or trustees subject to powers held by one or more interested persons of the filing organization to elect or appoint, or remove and replace, such directors or trustees or the members that elect or appoint them.
55
SchLthreshold businesstransactions?
NotReportable
Is That Org Reportable on Schedule L?
Yes
Isotherorga501(c)(3) Yes orsame501(c)type?
NotReportable
No >35%control? Yes No
NotReportable
Reportable OnSchLPtIV
Schedule L Related Orgs Effect on 990, Part VI

Independent voting members must pass these two criteria (and 2 more):
3. Neither the member, nor any family member of the member, was involved in a transaction with the organization (whether directly or indirectly through affiliation with another organization) that is required to be reported on Schedule L (Form 990 or 990EZ) for the organization's tax year. 4. Neither the member, nor any family member of the member, was involved in a transaction with a taxable or tax-exempt related organization (whether directly or indirectly through affiliation with another organization) of a type and amount that would be reportable on Schedule L (Form 990 or 990-EZ) if required to be filed by the related organization.
Questions??
58

2012 IRS Form 990 Whats New - Whats Important

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2012 IRS Form 990 Whats New - Whats Important

Uploaded by

Copyright:

Available Formats

2012 Form 990: Whats New, Whats Important

February 26, 2013 Deborah G. Kosnett, CPA

IRS Highlights: 2012 EO Annual Report/ 2013 Workplan

Copyright Tate & Tryon 2013

2012 Workplan Results: Governance

Copyright Tate & Tryon 2013

2012 Workplan Results: Auto Revocation

2012 Workplan Results: Exam Process Info

2013 IRS Workplan: Form 990 Compliance

Copyright Tate & Tryon 2013

2013 IRS Workplan: Form 990 Compliance

Copyright Tate & Tryon 2013

2013 IRS Workplan: Form 990 Compliance

Focus on high gross receipts / very low total compensation

Focus on high fundraising income/low fundraising expense

2013 IRS Workplan: Governance

Copyright Tate & Tryon 2013

2013 IRS Workplan: 512(b)(13) Study

2013 IRS Workplan: Employment Tax Compliance

2013 IRS Workplan: Intl Charitable Activities

2013 IRS Workplan: Group Rulings

2013 IRS Workplan: 990-N Misfilers

Copyright Tate & Tryon 2013

2013 IRS Workplan: Self Declared Exempt Orgs

Copyright Tate & Tryon 2013

2013 IRS Workplan: Miscellaneous

Form 990 2012: Form and Instruction Update

Copyright Tate & Tryon 2013

Whats New for 2012 Core Form

Copyright Tate & Tryon 2013

Whats New for 2012 Core Form

Whats New for 2012 Core Form

Keep 1099-K copies with your records

Copyright Tate & Tryon 2013

Whats New for 2012 Core Form

Copyright Tate & Tryon 2013

Whats New for 2012 Core Form

Whats New for 2012 Core Form

Copyright Tate & Tryon 2013

Whats New for 2012 Glossary

Whats New for 2012 Miscellaneous

Copyright Tate & Tryon 2013

Whats New for 2012 The Schedules

Whats New for 2012 The Schedules

Whats New for 2012 The Schedules

Copyright Tate & Tryon 2013

Copyright Tate & Tryon 2013

Whats New for 2012 The Schedules

Copyright Tate & Tryon 2013

Whats New for 2012 The Schedules

Copyright Tate & Tryon 2013

Copyright Tate & Tryon 2013

Form 990 2012: Focus on Schedule C

Copyright Tate & Tryon 2013

Schedule C What Are the Trigger Questions?

Copyright Tate & Tryon 2013

Schedule C Political Activity Reporting

Copyright Tate & Tryon 2013

Part I-A for (Almost) Everyone

Report both direct and indirect political campaign activities

Copyright Tate & Tryon 2013

Part I-B Sec. 501(c)(3) ONLY

Copyright Tate & Tryon 2013