Form 990 and 990-EZ Filing

While numerous alterations were made to Form 990 and 990-EZ, we found the following three changes to be particularly notable to the organizations we serve.

1. Filing Requirements:
In order to facilitate the transition to the new forms, the IRS has established annual thresholds allowing organizations, not normally allowed to elect to file a Form 990-EZ, to do so. The Form 990-EZ thresholds begin with the 2008 tax year and lead up to the 2010 tax year, at which time the threshold will remain constant until further revision.

Below is the tiered transition guidelines the IRS implemented that allows smaller entities to file Form 990-EZ in lieu of Form 990 that postpones a number of the new requirements to a later filing date.  Both the gross receipts and assets test must apply in order to file the Form 990-EZ.

May file 990-EZ for:	Gross Receipts:	Assets:
2008 tax year (filed in 2009)	> $ 25,000 and < $ 1 million	< $ 2.5 million
2009 tax year (filed in 2010)	> $ 25,000 and < $ 500,000	< $ 1.25 million
2010 and later tax years	> $ 50,000 and < $ 200,000	< $ 500,000

2. Part VII: Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent Contractors.
Among the changes to this section are the two new definitions for “officers” and “key employees” and the inclusion of reporting compensation of the five highest paid employees, other than officers or key employees, who earn over $100,000 for the calendar year ending with or within the organization’s tax year.

An “officer” is a person who meets the following tests:

• Elected or appointed including employees, at any point during the tax year, to manage the organization’s daily operations such as a president, vice president, secretary or treasurer. This includes the Executive Director (CEO) and Finance Director (CFO).

A “key employee” is an employee of the organization (other than an officer, director or trustee) who meets all three of the following tests:

• $ 150,000 Test:
• Receives reportable compensation from the organization and all related organizations in excess of $150,000 for the calendar year ending with or within the organization’s tax year.
• Responsibility Test:
• Has responsibilities, powers or influence over the organization as a whole similar to those of officers, directors or trustees;
• Manages a discrete segment or activity of the organization that represents 10% or more of the activities,  assets, income or expenses of the organization, as compared to the organization as a whole or
• Has or shares authority to control or determine 10% or more of the organization’s capital expenditures, operating budget or compensation for employees.
• Top 20 Test:
• 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 organizations for the calendar year ending with or within the organization’s tax year?

3. Part VI: Governance, Management and Disclosure
This is a new section of the 990 which asks questions about your organization’s governance structure, polices and disclosure practices.

As a Form 990 filer, you should strive to establish the following policies and processes:

• A written conflict of interest policy
• A written whistleblower policy
• A written documentation and destruction policy
• Approval from independent persons as part of the process of determining compensation for your organizations CEO, Executive Director or top management official.
• As a best practice piece, we suggest a written ethics policy be established.

If you have questions about completing these or other sections of your Form 990, feel free to contact one of our nonprofit experts. To learn more about how we can help improve your financial reporting and performance, visit our CPA Services section.