Sunday, January 06, 2008

The New Tax Form You'll Have to File If Your Org Receives $25,000 Or More

The IRS finally revealed the new 990 tax form; the form that non profits are required to file. If your organization receives $25,000 or more during 2008, then in 2009 you will have to begin filing a 990, if you have not before.

Both, donors and the United States government now expect transparency and accountability. Non profits are expected to reveal their accounting, programmatic issues as well as successes, and operations; honestly, completely, and professionally. Tax form 990 is public record and often used to research non profits. If a donor is considering giving a large contribution to your organization they may research your group at length, and will certainly check your group's most recent tax filing. Think of it this way... people who have considered donating to your organization and your regular donors will benefit. Due to the new tax reporting requirements, your organization will have more operations, outcomes, program effectiveness, etc. documentation readily available. Use it to both market your organization and to engage donors (or potential donors, potential new board members, etc.) with.

For instance, the Summary Page of the new tax form asks for a quick view of the organization's finances and asks questions about agency governance and board operations. Requesting this new information, alone, improves the ability for the tax form reader to assess your organization. What percentage of donations received is spent on your organization's mission statement and programs? If it's less than 80%, some will wonder if your leadership manages your cash flow, operations, planning for future growth, etc. well. If you spend a small number of total receipts on your mission work, many potential donors will assume that you're simply asking them for donations under ulterior motives. Knowing that you spend 80% or more of total receipts on your programs is a comfort to your current and also potential donors - they should be made aware of this!

The IRS developed this new tax form because the previous one, created in the late 1970's, was outdated. Congress has dealt with more than one or two non profits, in recent years, who receive federal grants but seem to also pay their leadership exorbitant amounts and benefits. These kinds of operations were only discovered after Congress investigated the organizations. This situation was indicative of a real issue: the reporting required via federal tax filings was not informative enough for the government (and others) to SEE what a given nonprofit does/doesn't do with its money for its mission statement. The IRS asked for public commentary as they developed the new form. In its final state, the form reflects the government's and responding American nonprofit organizations' suggestions, goals, issues, and concerns.

IRS tax form 990 has an 11 page core that most nonprofits will fill out and additional schedules that some organizations will be required to complete. You can see the IRS' description of the new core here.

If you have further questions, read the IRS' press release on the new tax form in their article, "IRS Releases Final 2008 Form 990 for Tax-Exempt Organizations, Adjusts Filing Threshold to Provide Transition Relief"

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