Wednesday, August 20, 2008

IRS Finalizes The New And Updated Nonprofit Tax Form

The new tax form that nonprofits will be responsible to file annually has been finalized. The final version of the updated IRS Tax Form 990 (the form that nonprofits file annually at tax time) and its directions have been released by the IRS.

While creating the new 990 the IRS conducted studies (background papers are available on the IRS website), reviewed commonly used loopholes, and asked those effected by the changes (nonprofits, etc.) for their input.

Some nonprofits are concerned that the reporting required of the new form will cost more time and resources than the previous version, but my guess is the required reporting may wind up offsetting its expense to any nonprofit because having to track successes, report on how much of a donor's dollar is spent on the organization's programming or services, and other operations results will not only provide the level of a given nonprofit's transparency and compliance; those numbers and data can be used to promote any nonprofit. Increased required reporting will mean those data your organization tracks annually, from now on, can be used in your nonprofit's marketing materials, donation requests (results, results, results), program development considerations, and in other ways that will potentially increase donations and volunteers.

The new tax form will demonstrate the nation's movement from treating nonprofits as 'less than professional organizations who are do-gooders, so we don't need to be concerned about the organization's leadership's level of honesty, quality of oversight of its operations and bookkeeping, or quality of its work'. In other words, all of this talk, today, about nonprofits needing to become professional operations that comply with the law and practice the best practices as it completes its mission work.

I think that as grant writers begin to use the new form when prospecting for potential grant donors, we will appreciate the variety of information reported, the depth of information required, and our ability to ferrite out foundations that perhaps operate less than they could and we may not want to affiliate our nonprofit with.

Be ready to use the new form by checking it out (link above).

2 comments: said...

In my professional experience I have come across so many nonprofits whose reporting is practically nonexistant, as well as those who have openly admitted to me that their organization was established for, let's just say less than legitimate reasons. As a nonprofit professional I am glad to see that organizations will be required to be more compliant.

Arlene M. Spencer said...

Yes! I think that while the push for nonprofits who have not gathered this information in the past, to report acturately, will be maybe 'expensive' or 'extra work' in the beginning; but if they create and implement standard, regular, internal organizational reporting (e.g. service stats, analyzing where a donated dollar is spent and how much on overhead and how much on programs, etc.) out of the new reporting requiements the new 'self checks' will wind up not just improving the individual nonprofit, but will perhaps improve American nonprofits, as a sector. Nonprofits will benefit from having more information about their own operations (e.g. where can we improve) and they'll benefit from having more selling points to offer potential donors and volunteers (e.g. maybe 80% of every dollar raised goes to programming, for instance). It could be a positive, in the end.

Thanks for the comment!