IRS Issues New Form 990-T for Tax Year 2020

Thoughtware Alert Sep 14, 2020
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The IRS recently released drafts of the 2020 Form 990-T, Exempt Organization Business Income Tax Return, and Schedule A, Unrelated Business Taxable Income From an Unrelated Trade or Business. This year’s modification of the forms marks the third consecutive year of changes being made to the Form 990-T. It is thought that the forms and schedules might stay the same for the next couple of years, as the IRS has imposed an e-file mandate for all 990-Ts starting for tax year 2020. These changes were needed to also assist with the new reporting rules under Internal Revenue Code (IRC) Section 512(a)(6), also referred to as the unrelated business income (UBI) siloing rules.

Schedule A was created this year to allow each trade or business their own reporting schedule, instead of one activity reported on page 1 of the Form 990-T and the other activities on Schedule M. In addition, Schedule M only reported totals for various items that would need to be calculated using other sections or even additional attachments. The new Schedule A will now have the schedules attached to it that were originally only on the Form 990-T. Similar to 2019’s Schedule M, the total of all Schedule A's will be brought to the Form 990-T, now Part I, line 1.

There are various other reporting changes worth noting on the 2020 draft Form 990-T and Schedule A (compared to Schedule M and other schedules originally attached to Form 990-T). These include:

Form 990-T Heading Changes

  • Line F is a new checkbox to mark the return as being amended
  • Line H is a new checkbox to mark if the organization is only filing to claim a credit on Form 8941 (Credit for Small Employer Health Insurance Premiums) or Form 2439 (Notice to Shareholder of Undistributed Long-Term Capital Gains)
  • Line I is a new checkbox to mark if the organization is a 501(c)(3) organization that files a consolidated return with a 501(c)(2) titleholding corporation
  • Line J was created to state the total number of Schedule A's attached to the Form 990-T

Form 990-T Part Changes

  • Part I, line 2 replaced the amounts paid for disallowed fringes with a line reserved for future use
  • Part I, line 9 was created for trusts to enter their §199A deduction
  • Part IV, lines 4a and 4b were added to mark if the organization changed its method of accounting. If the method did change, the form inquires if the organization described the change on Form 990, Form 990-EZ, Form 990-PF, or Form 1128
  • Part V was created to allow for an explanation if the organization did not report the change in its method of accounting on the forms listed above or for any additional information that needs to be provided

Schedule A

  • Line D was created to provide sequencing for Schedule A
  • Part V reports unrelated debt-financed income and now includes a checkbox to note if the property is dual-use
  • Part IX reports all advertising income in this section. Prior year forms had a section for both separate and consolidated basis reporting. A new checkbox was added to identify consolidated basis reporting
  • Part XI was added to include supplemental information

The changes to the Form 990-T and various schedules are meant to make filing the Form 990-T easier to complete for e-filing, while still reporting the income using the new UBI siloing rules. It is important to note that these forms are only in draft form and should not be used to file tax returns with the IRS.

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