form 990 workshop form 990 workshop scott e. hallberg, cpa april 23, 2009 hyatt regency o’hare...

form 990 workshopform 990 workshop

Scott E. Hallberg, CPAApril 23, 2009

Hyatt Regency O’Hare • Rosemont, IL

Calibre CPA Group, PLLC / www.calibrecpa.com

Filing Phase-In

• The new Form is effective for tax years beginning in 2008

• Filing threshold - 2008• Gross receipts greater than or equal to $1,000,000 and• Total Assets greater than or equal to $2,500,000

• Filing threshold - 2009• Gross receipts greater than or equal to $500,000 and• Total Assets greater than or equal to $1,250,000

• Filing threshold – 2010 and later• Gross receipts greater than or equal to $200,000 and• Total Assets greater than or equal to $500,000

2


New Form Layout

• Consists of a 11 page Core Form

• 16 Schedules

• Page count all Forms/Schedules and instructions – approximately 200!

3


New Form Highlights

• Governance, Management, and Disclosure section

• Organization Policies• Activities Outside the United States• Compensation of Officers, Directors, Trustees,

Key Employees, Highest Compensated Employees, and Independent Contractors

• Transactions with Interested Parties• Supplemental Information (Schedule O)• Related Organizations

4


Form 990 Header Part I and Part II

• New questions in header• Name and address of principal officer

• Person ultimately responsible for implementing the decisions of the governing body

• Type of organization: Corporation, Trust, Association, Other• Year of formation

• Corporation – date of incorporation• For all others – date legally created

• State of legal domicile• For Corporation – state of incorporation• For all others – state whose law governs the organizations internal

affairs• Part I – Summary

• Snap shot – brings key data to the front of the form• Enter total number of volunteers (estimate if necessary)

• Part II – Signature Block

5


Checklist of Required SchedulesPart IV – Page 3

• For each “Yes” answer to a question in Part IV you must attach the applicable Schedule referenced

7


Statements Regarding Other IRS Filings and Tax CompliancePart V – Page 5

• New Questions – 1a, 1b, 1c, 2a, and 2b• Enter the number in Box 3 of Form 1096 Annual

Summary and Transmittal of U.S. Information returns

• The number of Forms W-2G included above• Did you comply with backup W/H rules?

• Enter number of employees reported on Form W-3 Transmittal of Wage and Tax Statements

• Did you file all required federal employment tax returns?

8



• New Questions – 7a, 7b, 7c, and 7d• Charitable organizations only

• Did the organization provide goods and services in exchange for any quid pro quo contribution of more than $75?

• Did the organization notify the donor of the value of the goods and services provided?

• Did the organization sell, exchange or otherwise dispose of tangible personal property for which it was required to file 8282?

• How many 8282 ‘s were filed?

9



• New Questions – 7g, 7h, 8, 9a, and 9b• For all contributions of qualified intellectual property,

did the organization file Form 8899 as required?• For contributions of cars, boats, airplanes, and other

vehicles, did the organization file a Form 1098-C as required?

• For organizations maintaining donor advised funds:• Make any taxable distributions under section 4966?

• Make a distribution to a donor, donor advisor or related person?

10

Governance, Management, and Disclosure

Part VI

11

Governing Body and Management

Part VI, Section A

12


Governing Body and ManagementPart VI – Page 6

Core Form, Part VI, Section A, Line 1b• How many Board members are independent?

• Not compensated as an officer or other employee of the organization or a related organization,

• The member did not receive total compensation or other payments exceeding $10,000 for the year from the organization or from related organizations as an independent contractor, other than reimbursement of expenses or reasonable compensation for services provided in the capacity as a member, and

• Neither the member, nor any family member of the member, was involved in certain reportable financial transactions and arrangements with the organization or a related organization (direct or indirect)

• Generally those financial transactions and arrangements that must be reported on Schedule L

13


Related OrganizationPart VI – Page 6

• Parent – an organization that controls the filing organization

• Subsidiary – an organization controlled by the filing organization

• Brother/Sister- organization controlled by the same person or persons that control the filing organization

• Supporting/Supported

• Control is defined in the glossary for the 990

14


Business RelationshipPart VI – Page 6

Core Form, Part VI, Line 2• Did any officer, director, trustee or key employee have a

business relationship with any other officer, director, trustee or key employee?

• One person is employed by the other in a sole proprietorship or by an organization with which the other is associated as a trustee, director, officer, key employee or greater than 35% owner

• One person is transacting business with the other (other than in the ordinary course of business) directly or indirectly, in one or more contracts of sale, lease, license, loan, performance of services or other transaction involving transfers of cash or property valued in excess of $10,000 in the aggregate

• Two persons are each a director, trustee, officer or greater than 10% owner in the same business or investment entity

15


Reasonable Effort

• The instructions state that an organization need not engage in more than a reasonable effort

• Safe harbor for reasonable effort:• May rely on information the organization obtains in

response to an annual questionnaire sent to each officer, director, trustee or key employee

• Name, title, date, and signature of each person responding• Pertinent instructions and definitions necessary to answer

the question

16


FamilyPart VI – Page 6

Core Form, Part IV, Line 28b; Schedule L, Part IV•Did any current or certain former officer, director, trustee or key employee have a family member who had a direct or indirect business relationship with the organization? •Family defined:

• Spouse• Ancestors• Brothers and sisters• Children• Grandchildren and great grandchildren• Spouses of brothers, sisters, children, grandchildren, and great

grandchildren

17


Reasonable Effort



response to an annual questionnaire sent to each voting member of the governing body that includes the:


the question

18


Other New QuestionsPart VI – Page 6

Core Form, Part VI, Question 3• Did the organization delegate control over

management duties customarily performed by or under the direct supervision of officers, directors etc.

• Some examples:• Hiring and firing supervising personnel• Planning or executing budgets• Financial operations• Supervising unrelated trades or businesses of the

organization• Administrative functions such as payroll processing are not

considered management duties

19



Core Form, Part VI, Question 5• Did the organization become aware during

the year of a material diversion of assets?• Theft • Embezzlement

• Material diversion:• Exceeds the lesser of:

• $250,000• 5% of the total gross receipts or 5% of total assets

20



Core Form, Part VI, Questions 6, 7a, and 7b• Does the organization have members or stockholders?

• Answer yes, unless the organization is a trust for federal tax purposes

• Does the organization have members, stockholders or other persons who may elect one or more members of the governing body?• Answer yes if anyone had the right to elect or appoint one or more

members of the organizations governing body

• Are any decisions of the governing body subject to approval by members, stockholders or other persons?• Answer yes if anyone had the right to approve or ratify decisions of

the governing, such as approval of the election or removal of members of the governing body

21


Meeting DocumentationPart VI – Page 6

Core Form, Part VI, Question 8, 8a, and 8b• Did the organization contemporaneously

document meetings held or written actions undertaken during the year by its governing body? [Part VI, Section A, Line 10]• By each committee with authority to act on behalf of the

governing body?

• Contemporaneous means the later of:• The next meeting• 60 days after the meeting

• Document is defined as any means permitted by state law

22


Other New Questions Part VI – Page 6

Core Form, Part VI, Question 9a and 9b

• Does the organization have local chapters, branches or affiliates?• Do you have written policies and procedures

governing those chapters, branches or affiliates?

• If you don’t have a written policy, if applicable, you must explain on Schedule O how the organization ensures that the local units’ activities are consistent with its own

23


Review of Form 990Part VI – Page 6

Core Form, Part VI, Section A, Line 10• Is a copy of Form 990 provided to the organization’s

governing body before it is filed? • To answer “yes” to this question the final version of Form

990 must be provided to each voting member of the organization governing body in paper or electronic form

• In Schedule O you must describe the process, if any, by which any of the organization’s officers, directors, trustees, Board committee or management reviewed Form 990• Was it reviewed before or after it was filed?• Who conducted the review?• When did they conduct the review?• What was the extent of the review?

• If no review was conducted state on Schedule O that “No review was or will be conducted”

24

PoliciesPart VI, Section B

25


Conflict of Interest PolicyPart VI – Page 6

Core Form, Part VI, Section B, Line 12

• Does the organization have a written conflict of interest policy? • Are officers, directors or trustees, and key employees

required to disclose annually interests that could give rise to conflicts?

• Does the organization regularly monitor and enforce the policy?

• Describe in Schedule O how this is done

26


Whistleblower PolicyPart VI – Page 6


• Does the organization have a written whistleblower policy?

• Does the organization have a confidential complaint process?

• Does the organization have a written non-retaliation policy?

27


Document Retention PolicyPart VI – Page 6


• Does the organization have a written document retention and destruction policy?

• Does the policy include guidelines for electronic files?

28


Compensation ApprovalPart VI – Page 6

Core Form, Part VI, Section B, Line 15a and 15b• Does the process for determining compensation

include review and approval by the governing body composed of entirely independent individuals or compensation committee, use of comparability data, and document the deliberation and decision-making process regarding the compensation arrangement for: • CEO, Executive Director, or top management official?• Other officers or key employees?

• If the answer is “yes” you must describe the process on Schedule O

29


Joint VenturesPart VI – Page 6

Core Form Part VI, Section B, Line 16a and 16b

• Did the organization invest in, contribute assets to or participate in a joint venture or similar arrangement with a taxable entity?

• If “yes,” has the organization adopted a written policy or procedure to evaluate joint venture participation and taken steps to safeguard its tax exempt status?

30

Disclosure Part VI Section C

31


Public InspectionPart VI – Page 6

Core Form, Part VI, Section C, Line 19• Does the organization make its Form 990, Form 1023 or

1024 (990-T for 501(c)(3)) available for public inspection on its website, another website or upon request? If so how?

• Forms 1023 or 1024 filed before July 15, 1987 need not be made public unless the organization had a copy on July 15, 1987• Form 990 must be made public for a period of three years from the

date it was required to be filed, including extensions• Does the organization make its governing documents,

conflict of interest policy, and financial statements available for public inspection? If so how?

• Must explain on Schedule O

32

Compensation of Officers, Directors, Trustee, Key

Employees, Highest Compensated Employees,

and Independent ContractorsPart VII

33


Persons to be Reported on Part VIIPart VII – Page 7

• Current officers, directors, and trustees (no minimum compensation threshold)

• Current key employees

• Current five highest compensated employees other than officers, directors, trustees or listed key employees

• Former directors and trustees

34


Key EmployeePart VII – Page 7

Core Form, Part VII, Section A• Receive reportable compensation from the

organization and all related organization(s) of more than $150,000;

• Is one of the 20 employees (that satisfy the $150,000 Test and Responsibility Test) with the highest reportable compensation from the organization and related organization(s);

• Have responsibilities, powers or influence similar to officers:

• Manage a segment or activity that represents 10% or more of its activities, assets, income or expenses; or

• Authority to control 10% or more of the organization’s capital expenditures, capital budget or compensation for employees

35


Five Current Highest Compensated EmployeesPart VII – Page 7

Core Form, Part VII, Section A

• Excludes officers, directors, trustees, and key employees ...

• That received reportable compensation or more than $100,000 from the organization or any related organizations?

36


Former IndividualsPart VII – Page 7

• Reported on any of the organization’s prior five years of Form 990 and• Former officers, key employees or highest-

compensated employees who received more than $100,000 of reportable compensation

• Former directors or trustees that received, in their capacity as former directors or trustees, more than $10,000 of reportable compensation. [Core Form Part VII, Section A]

• Transition rule – for non-section 501(c)(3)• Non-section 501(c)(3) organizations do not report any

former highest compensated employees

37


Reportable CompensationPart VII – Page 7

• Column D – Reportable compensation from the organization

• Column E – Reportable compensation from related organizations (see reasonable effort/safe harbor)

• Part VII Column D and Column E• Amounts reported on Form W-2, Box 5• Amounts reported on Form 1099-MISC, Box 7

• Part VII Column F – Other Compensation (reasonable estimates can be used)

38


Reasonable EffortPart VII – Page 7

• The instructions state that an organization need not engage in more than a reasonable effort.


response to an annual questionnaire sent to both current and former officers, directors, trustees or key employees, and highest compensated employees


the question

39


Other CompensationPart VII – Page 7

Core Form, Part VII, Column F • Reasonable estimates can be used

• Tax deferred contributions to a qualified defined contribution plan

• The annual increase in actuarial value of a qualified defined benefit plan

• The value of health benefits that are not included in Form W-2, Box 5

• Tax deferred contributions to a nonqualified defined contribution plan

• The annual increase in actuarial value of a nonqualified defined benefit plan

40


Statement of RevenuePart VIII – Page 9

• The old Form 990 required revenues to be reported in two places

• The new Form 990 incorporates the reporting into one part• No significant changes in the data required to

complete this part

41


Statement of Functional ExpensesPart IX – Page 10

• Part IX is very similar to the old Form

• Compensation reported in Part IX is to be prepared based on the organization’s accounting method and accounting period

• Compensation reported in Part VII is based on actual W-2’s issued within the organization’s tax year

• These two Schedules may not agree

42


Balance SheetPart X – Page 11

• No significant differences from the old Form

43


Financial Statements and ReportingPart XI – Page 11

• Was the organization’s financial statements compiled or reviewed by an independent accountant?

• Was the organization’s financial statements audited by an independent accountant?

• Does the organization have a committee that assumes responsibility for oversight of the audit, review or compilation of its financial statements and selection of an independent accountant? [Core Form Part XI, Line 20]

44


Public Charity Status and Public Support Schedule A

Core Form, Part IV, Question 1• Is the organization described in section 501(c)

(3) or 4947(a)(1) (other than a private foundation)?

• New Schedule A is focused on public charity status and public support

• Now required to complete Schedule A on same accounting basis that is used on the Core Form• If you use accrual basis on Core Form you must also use

accrual basis for the public support test• You will not be able to use numbers reported on last year’s

Form as these numbers were reported on as cash basis

45


Schedule of ContributorsSchedule B

Core Form, Part IV, Question 2

• Schedule B is generally required to provide a list of contributors who gave the organization $5,000 or more

• No significant changes from the old Form

46


Political Campaign and Lobbying ActivitiesSchedule C

Core Form, Part IV, Questions 3, 4, and 5• Did the organization engage in direct or indirect

political campaign activities on behalf of or in opposition to candidates for public office

• Section 501(c)(3) organizations:• Did the organization engage in lobbying activities?

• Section 501(c)(4), 501(c)(5), and 501(c)(6) organizations:

• Is the organization subject to the section 6033(e) notice and reporting requirement and proxy tax?

47


Supplemental Financial StatementsSchedule D

Core Form, Part IV, Questions 6, 7, 8, 9, and 10 • Did the organization maintain any donor advised

funds …?• Did the organization receive or hold a conservation

easement …?• Did the organization maintain collections of works of

art, historical treasures …?• Did the organization have any escrow account liability

… provide credit counseling …?• Did the organization hold assets in term, permanent

or quasi-endowments?

48


Supplemental Financial StatementsSchedule D

Core Form, Part IV, Questions 11 and 12 • Did the organization report on its balance sheet any:

• Land, buildings and equipment?• Investments – other securities?• Investments – program related?• Other assets?• Other liabilities?

• Did the organization receive an audited financial statement … prepared in accordance with GAAP?

49


SchoolsSchedule E

Core Form, Part IV, Question 13

• Is the organization a school …?

• Schedule E is not covered in this Workshop

50


Statement of Activities Outside the United StatesSchedule F

Core Form, Part IV, Questions 14a, 14b, 15, and 16

• Did the organization maintain an office, employees, or agents outside of the U.S.?

• Did the organization have aggregate revenues or expenses of more than $10,000 from grant making, fundraising, business, and program service activities outside of the U.S.?

• Did the organization report on Part IX, column (A), line 3, more than $5,000 of grants or assistance to any organization or entity outside of the U.S.

• Did the organization report on Part IX, column (A), line 3, more than $5,000 of grants or assistance to any individuals outside of the U.S.

51


Supplemental Information Regarding Fundraising or Gaming ActivitiesSchedule G

Core Form, Part IV, Questions 17, 18, and 19• Did the organization pay more than $15,000 in the

aggregate for professional fundraising services?• Did the organization receive more than $15,000 from

fundraising events?• Did the organization receive more than $15,000 of

gross income from gaming activities?

52


HospitalsSchedule H

Core Form Part IV, Question 20

• Did the organization operate one or more hospitals?

• Schedule H is not covered in this Workshop

53


Grants and Other Assistance to Organizations, Governments, and Individuals In the U.S. Schedule I

Core Form, Part IV, Questions 21 and 22

• Did the organization provide more than $5,000 in grants and other assistance to governments and organizations in the U.S.?

• Did the organization provide more than $5,000 in grants and other assistance to individuals in the U.S.?

54


Compensation InformationSchedule J

Core Form, Part IV, Question 23• All questions refer back to Part VII,

“Compensation of Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees”• Did the organization list any former officer, director or

trustee, key employee or highest compensated employee?• Did anyone reported on Part VII, Section A receive more

than $150,000 in compensation from the organization and any related organization?

• Did anyone reported on Part VII, Section A receive or accrue compensation from any unrelated organization for services rendered to the organization?

55


BenefitsSchedule J

• Does the organization provide any of the following to anyone reported on Part VII, Schedule J, Part 1, Line 1a:• First class or chartered travel?• Travel for companions?

• Must check if a person is a family member whether or not for bona fide business purposes

• Tax indemnification and gross-up payments?• Discretionary spending account?

• Any amounts not part of an accountable plan• Housing allowance or residence for personal use?• Payments for business use of principal residence?• Health or social club dues or initiation fees?• Personal services (i.e. maid, chauffeur, chef)?

56


Supplemental Information on Tax Exempt BondsSchedule K

Core Form, Part IV, Questions 24a, 24b, 24c, and 24d

• Did the organization have a tax exempt bond issue of more than $100,000 as of the last day of the year after December 31, 2002?

• Did the organization invest any proceeds of tax exempt bonds beyond a temporary period exception?

• Did the organization maintain an escrow account other than a refunding escrow at any time during the year to defease any tax exempt bonds?

• Did the organization act as an “on behalf of” issuer for bonds outstanding at any time during the year?

57


Transactions With Interested PersonsSchedule L

Core Form, Part IV, Questions 25a, 25b, and 26

• For section 501(c)(3) and 501(c)(4) organizations:• Did the organization engage in a “excess benefit”

transaction with a “disqualified person” during the year?

• Did you become aware of such a transaction from a prior year?

• Was a loan to or by a current or former officer, director, trustee, key employee, highly compensated employee or disqualified person outstanding at the end of the year?

58


Excess BenefitsSchedule L

• Applies only to 501(c)(3) or 501(c)(4) organizations

• Did the organization engage in any excess benefit transactions with any current or former officer, director, trustee, key employee, highly compensated employee or disqualified person? (Part IV, Line 26)

59


Excess Benefit DefinedSchedule L

• An excess benefit transaction results when a disqualified person is paid compensation or receives property from the organization that exceeds the fair market value (FMV) of the services or property provided to the organization from the disqualified person

60



Core Form Part IV, Question 27

• Did the organization provide a grant or other assistance to an officer, director, trustee, key employee or substantial contributor, or to a person related to such an individual?• Examples of grants – scholarships, fellowships,

internships, prizes, and awards• Other assistance – the provision of goods, services,

or use of facilities regardless of amounts

61


Interested PersonSchedule L, Part III

• For all organizations:• Current or former officers, directors, trustees, key

employees, and five highest compensated employees. (Persons listed in Part VII, Section A)

• A substantial contributor• In addition, for 501(c)(3) and 501(c)(4) entities:• A “disqualified” person:

• Any person who was in a position to exercise substantial influence over the affairs of the organization at any time during a five year period ending on the date of a specific transaction

• A complete detailed definition is found in Appendix G

62


Reasonable Effort



response to an annual questionnaire sent to both current and former officers, directors, trustees, key employees, and each member of grant selection committee


the question

63



Core Form, Part IV, Questions 28a, 28b, and 28c•During the tax year, did any person who is a current or former officer, director, trustee, or key employee:

• Have a direct business relationship with the organization … or an indirect business relationship through ownership of more than 35% in another entity …?

• Have a family member who had a direct or indirect business relationship with the organization?

• Serve as an officer, director, trustee, key employee, partner or member of an entity (>5%) or shareholder of a (>5%) professional corporation doing business with the organization?

64


Interested PersonSchedule L, Part IV

• For all organizations:• Current or former officers, directors, trustees, key

employees, and five highest compensated employees (persons listed in Part VII, Section A) and their family members

• An entity more than 35% owned directly or indirectly by any persons listed in Part VII, Section A and their family members

• An entity (other than tax exempt) for which a person listed in Part VII, Section A served as an officer or director or had a > 5% interest as a partner or shareholder

65


Reasonable Effort



response to an annual questionnaire sent to both current and former officers, directors, trustees, and key employees


the question

66


Business Transactions

• Business transactions include but are not limited to:• Contracts of sale, leases, licenses, performance of

services, and joint ventures

• Only report transactions if:• All payments during the year between the

organization and the interested person exceeded $100,000

• All payments from a single transaction exceeded the > of $10,000 or 1% of total revenues

• Compensation payments to family members exceed $10,000

67


NonCash ContributionsSchedule M


• Did the organization receive more than $25,000 in non-cash contributions?

• Did the organization receive contributions of art, historical treasures or other similar assets, or qualified conservation contributions?

68


Liquidation, Termination, Dissolutionor Significant Disposition of AssetsSchedule N


• Did the organization liquidate, terminate or dissolve and cease operations?

• Did the organization sell, exchange, dispose of or transfer more than 25% of its net assets?

69


Supplemental InformationSchedule O

• Schedule O – Supplemental Information to Form 990

• Schedule O is simply a blank sheet of ruled paper• This Schedule is primarily used to clarify responses to questions• You may add any additional information you would like to point

out or to provide additional information to the public

• This Schedule is referred to throughout the IRS instructions and throughout our Workshop

• Many of the questions on Form 990 require an explanation or a description on Schedule O

70


Related Organizations and Unrelated PartnershipsSchedule R

Core Form Part IV, Questions 33, 34, 35, 36, and 37

• Did the organization own 100% of an entity disregarded as separate from the organization?

• Was the organization related to any tax exempt or taxable entity?

• Is any related organization a controlled entity?• For 501(c)(3) organizations:

• Did the organization make any transfers to an exempt non-charitable related organization?

• Did the organization conduct more than 5% of its activities through an entity that is not a related organization and that is treated as a partnership for federal income tax purposes?

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Questions?

LEGAL NOTICE: The contents of this document are proprietary to Calibre CPA Group, PLLC and should not be distributed, copied or altered without express permission of Calibre CPA Group, PLLC. The information it contains is provided with the understanding that Calibre CPA Group, PLLC is not rendering legal, accounting or other professional advice or opinions on specific facts or matters, as each individual circumstance is unique. Contents have been prepared for the exclusive and private use of the intended recipient(s). © Calibre CPA Group, PLLC

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