It must be tough to be a member of the board of directors for the Metropolitan Washington Airports Authority (MWAA) lately. There are numerous headlines blasting insider deals and lax travel policies. A former board member has gotten the boot after headlines ballyhooing how she obtained a full-time job with a salary of $180,000 a year to be an “advisor” with full benefits. The airports authority is adopting stricter travel policies and spending policies in the wake of such embarrassing details as a $9,000 plus ticket for one board member to travel to Prague. A stricter ethics policy is also being discussed by the board. Link to the NBC article: http://www.nbcwashington.com/blogs/first-read-dmv/Airport-Authority-Setting-New-Rules-168596246.html
The Federal Form 990 informational return filed by most nonprofit organizations, which is open to public inspection, covers every area mentioned above. Transactions with interested parties, conflict of interest polices, compensation of former board members are all revealed in the public return filed annually by nonprofit organizations. Good governance suggests the entire board should review a Form 990 before it is filed with the IRS, and during such a process issues such as these come to light for the first time for many board members. If the MWAA were a nonprofit organization required to file a Form 990, these shady deals and lax policies may have come to light for the board members much sooner, and possibly without all the headlines.
Sign up for a phone forum conducted by the specialists at the IRS on tax exempt organizations, to be held on July 18, 2012, at 2:00 p.m. EST, titled “Exempt Organizations and Gaming”. Here is the link to register: http://www.irs.gov/charities/article/0,,id=258086,00.html
Topics to be covered:
- Impact of gaming on tax-exempt status
- Internal controls and record keeping
- Form 990 filing requirements
- Unrelated Business Income Tax
- Filing requirements for Payments made to individuals
- Wagering/excise taxes
A recent study published by Identity Finder, a security and privacy software company, revealed that nearly half a million social security numbers were included in public filings of Form 990. The study reports that between 2001 and 2006, 18% of all non-profit organizations included at least one social security number on their Form 990. Since these forms are permanently public, this practice opens these individuals to identity theft.
Personal information gets reported when there are individual scholarship recipients, tax preparers, employees and in some cases individual donors. The charities that disclose this information can be held liable if the information is fraudulently misused.
The IRS does NOT require organizations to include social security numbers on Form 990 – even for the tax preparers who are required to provide their tax id next to their signatures. The instructions state that they should NOT provide social security numbers.
#form990 #identitytheft #nonprofit #taxexempt
The IRS e-filing computer system was down for maintenance and programming changes so the IRS extended the filing deadline for organizations that would normally have had deadlines of January 17 or February 15, 2012 to March 30, 2012. However, the system sent some of those filers late filing penalty notices automatically even though the organizations had complied with the adjusted deadlines.
If you received such a notice, call the number at the top of the notice: 1-800-829-5500 and request that the IRS abate the penalty in accordance with Notice 2012-4.
Source: Journal of Accountancy
#nonprofit #taxexempt #990 #penaltynotice #irs
The Internal Revenue Service announced the launch of a new online look-up tool, Exempt Organizations Select Check, that will allow taxpayers to find out whether an organization is eligible to receive tax-deductible contributions or has had its tax exemption revoked. Select Check replaces the online version of Pub. 78 and the IRS’s Auto-Revocation List.
The 2011 Form 990 is not significantly changed from the prior year, but the instructions do have some possibly significant clarifications contained in them, if the particular area is applicable to your situation. Here is a bullet list of the significant clarifications:
- Any organization must file Form 990, 990EZ or 990-N, even if an exemption application has not been filed or approved yet. (The exemption for churches and certain religious organizations still exists.)
- If you had foreign investments valued at $100,000 or more, you must complete Schedule F, Part I and IV.
- Clarification on when to complete the parts of Schedule F providing grants or assistance made to organizations or individuals outside the United States.
- Clarification with examples for when a board member is considered independent.
- If the governing body allowed an executive committee to act on its behalf, it must provide an explanation in Schedule O.
- The governance section now asks if any governance decisions of the organization reserved to (or subject to approval by) members, stockholder, or persons other than the governing body.
- Instructions added that an organization cannot say “yes” to the governance area question (line 11a) about providing the 990 to the voting governing body before filing with the IRS if it merely notifies them that the 990 is available upon request for review. It is satisfactory, though, to provide a link to a password-protected web site on which the entire Form 990 can be viewed.
The 2011 form can be found at: http://www.irs.gov/pub/irs-pdf/f990.pdf.
The 2011 990 instructions can be found at: http://www.irs.gov/pub/irs-pdf/i990.pdf.
The Journal of Accountancy has an article about the changes to the 2011 Form 990. Changes noted include:
- Organizations must complete Schedule F, Statement of Activities Outside the U.S., if it had foreign investments during the year valued at $100K or more. This means any offshore investments and hedge funds whereas Sch F had previously been specific to revenue of $10K or more from foreign activities.
- Part X, Balance Sheet must now show distributive share of assets in any joint ventures including partnerships that would have been reported on a Schedule K-1.
- Distributive share of investment income, royalties and rental income from joint ventures should be reported on specific lines of Part VIII, Statement of Revenue.
- The definition of “grants and other assistance” has been adjusted to exclude certain payments by voluntary employees’ beneficiary associations.
- A donor’s phone bill for a text message donation now meets the requirement for written record if it shows the donee organization’s name, and the date and amount of contribution.
The IRS has granted an extension to nonprofits filing Forms 990, 990EZ, 990PF or 1120-POL whose normal filing deadline is either January 17, 2012 or February 15, 2012 due to the electronic filing system being taken down for work. This would affect nonprofits whose year end is either August 31, 2011 or September 30, 2011, or who had filed an extension to January 17, 2012 or February 15, 2012. For more details, click this link to IRS Notice 2012-4 posted on the IRS website December 16, 2011:
Has your organization lost its exempt status for failure to file the required 990 forms for three consecutive years? You can apply for reinstatement and pay a user fee if you want the tax exempt status restored. http://www.irs.gov/charities/article/0,,id=239696,00.html.
Some organizations may qualify for a reduced user fee of $100 under a transitional relief program. Use Notice 2011-43 to see if you qualify. http://www.irs.gov/pub/irs-tege/n2011_43.pdf.
The Washington Post is reporting on compensation of the President of GWU as he “cracks the $1 million” level in a sensational sounding article. The Federal Form 990 is open to public inspection, and as every compensated officer, key employee or “highest compensated” employee knows, that means their compensation and benefits are reported in Part VII of the form on open display for the general public. Arguably more important, in Part VI Section B of the 990, the policies of how an organization approves and documents the decision process for compensating their CEO and other top positions is also disclosed. The IRS is encouraging all organizations to use the three prong approach of: having an independent review and approval system, the use of comparability data, and the written substantiation of the deliberation and decision process. It is important to note that lately the IRS has had representatives attending conferences and using other outlets to publicize their opinion that there is a flaw to using “comparability data” referred to as upward creep. Basically, upward creep means using comparative data over several years for compensation rates, and consistently choosing the upper strata to set compensation levels, the comparability data itself inherently become inflated.
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