Tax

Form 990 Carries Increased Importance

2015
Author:  Kevin Ensminger

Kevin Ensminger

Director

Tax

1201 Walnut Street, Suite 1700
Kansas City, MO 64106-2246

Kansas City
816.221.6300

Over the past several years, IRS Form 990 has evolved into a highly comprehensive required filing for not-for-profit organizations. Exempt entities are being challenged to provide more transparency regarding their operations and executive compensation. Now it looks as though these returns will be getting a closer look by the federal government.

The IRS announced in 2015 that it is proceeding with plans for more computer scans of Form 990 filed by exempt organizations. “The examination side [of the IRS] is going to be setting up computer queries to spot inconsistencies and missing information,” said Elaine Leichter, a tax law specialist in the IRS Tax-Exempt and Government Entities Division.

While Form 990 always has been used as an enforcement tool, the IRS is apparently ramping up those efforts. It is more critical than ever for not-for-profits to complete their returns as completely and accurately as possible.

Now that the IRS can match information on Form 990 to other databases, organizations will need to avoid inconsistencies. Not only will compensation be matched to W-2 and 1099 filings, but activities such as lobbying can easily be compared to public information on congressional websites. Required supporting schedules will need to maintain accuracy with content of the core form.

Speaking at the Washington Non-Profit Legal and Tax Conference, Leichter said if filers fill out the various sections and schedules as the instructions call for, they should have no need to attach documents. “Attachments are not helpful,” she said. “There is a place for that in the return.”

But Leichter said the IRS will maintain “a level playing field” between paper and electronic returns. She added that just because electronic forms are easier for computers to process, that doesn’t mean electronic forms are more likely to draw an audit. “We don’t want to create an incentive for people to not file electronically,” Leichter said.

There’s one new twist coming on the 2015 Form 990:  a box for organizations to check if they self-declare their tax-exempt status.



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