Tax-exempt Organizations Need to Plan Ahead for Tax Filing Season

Tax-exempt Organizations Need to Plan Ahead for Tax Filing Season

(ARA) - When the holiday giving season ends in January, it will be time to start thinking about another season -- tax season -- and how changes to tax laws and filing requirements will affect your charitable organization. But non-profits, local sports leagues, animal rescue groups, fraternal organizations, and other tax-exempt organizations that file the Form 990 with the IRS cannot

afford to wait until 2009 to begin filing preparations.

The IRS has redesigned the Form 990 to reflect significant changes that have taken place in the tax law and non-profit sector. The result? An entirely new annual reporting form for tax-exempt organizations to tackle.

The new 990 offers tax-exempt organizations the opportunity to explain their work in detail and provides the public with greater transparency about how organizations spend their money. In a time when consumers and businesses are looking closely at their expenses, many will use the new form to help them decide which organizations to support.

Far More than Finance

Extensive input from the tax-exempt community helped to ensure that the new 990 reflects the diversity and complexity of their operations today. In addition to financial reporting, the new form requires organizations to provide more information about operations, internal policies and practices than ever before, including foreign activities, executive compensation, governance and fundraising. These new sections offer organizations the chance to provide better information about mission, programs and goals.

The new 990 is comprised of a core form, plus 16 schedules. Organizations complete only the schedules that apply to them. But to fill out the form completely, accurately and on-time, organizations may need or desire input from program staff and board members in ways they didn’t before. Organizations may also want to re-assess if their internal systems need to be updated to reflect the new reporting requirements.

Improved Compliance and Transparency

The new 990 uses standardized schedules and enhanced reporting to provide critical information about tax compliance. As a result of this standardization, information on organizational activities, such as fundraising or grant-making, can be more easily compared across organizations. The new form provides more opportunities to explain activities and provide context for financial and operational information.

The new 990 also makes it easier for the public to find specific information about an organization—a key advantage in today’s increasingly transparent world. By providing a more complete, logical picture of activities, organizations will be able to use the form to demonstrate to the public, donors and other key stakeholders how they support their mission and goals.

The Time is Now

Tax-exempt organizations must file the new 990 for the 2008 tax year if they have either gross receipts of $1,000,000 or more, or total assets of $2,500,000 or more; there is a three-year phase-in period for most smaller organizations.

The new form may require additional or different support from outside preparers, so it is important for organizations to talk to their preparers now to determine what they will need to do to file the new 990. Specifically, many organizations that wish to change internal procedures related to the new 990 have until December 31, 2008 to do so for the 2008 tax year.

The IRS wants every tax-exempt organization to get the information they need to file completely, accurately and in a timely manner. To help with the transition, the IRS created tools and resources that are available at www.IRS.gov/charities and www.stayexempt.org. Tax-exempt organizations and preparers also can stay informed of the latest news by subscribing to the "EO Update" newsletter, available on the IRS Web site.

Courtesy of ARAcontent