Friday, September 14, 2007

990 in transition

As most readers probably know, the form nearly all nonprofits in the US have to fill out annually for the Internal Revenue Service is undergoing its first major revision in over 25 years.

The IRS 990 has become a much more important tool of late, since it is the major data point that many online nonprofit watchdogs such as GuideStar use as they rate the management effectiveness of an organization. With the added transparency requirements of Sarbanes-Oxley, more and more nonprofits are putting more and more time and effort into their 990's including, sadly, efforts to game the form, particularly when it comes to accounting for administrative costs.

Enter the US Senate and their hearings on nonprofit management and accountability. Of the many recommendations made last year, the one that I believe will have the most long-term impact is the change in this form: pretty much everyone will be affected.

The IRS says that one of its goals in the redesign is "to the extent practicable, to minimize the burden on the filing organizations". Good idea. We'll see.

New is a requirement that all nonprofits who have over $25,000 in revenue file the 990 every year. Less burden? And, all nonprofits have to prove that they have a variety of governance policies in place for their board. Again, a good idea in the abstract. But necessary for a small nonprofit like a soccer team booster club? I dunno

If you haven't already, you should take a look at the draft form, and the IRS has taken the very unusual step of posting the draft of the redesign online for people to see and comment. Take a look at the form, and other information on the 990 from the IRS here.

For some perspective and insight, here is an article on the new 990 from Joanne Fritz.

Death, taxes and the IRS 990. All inevitable, so get prepared -- at least for the 990 -- now.

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