What’s old is now new
IRS Form 990 gets redesigned

The last time IRS Form 990 was substantially revised, Jimmy Carter was living in the White House. Much has changed since then. So it only makes sense that not-for-profits are getting a new Form 990 that better suits the public’s information needs.

Drafting an answer

On June 14, 2007, the IRS published a draft version of the long-awaited Form 990 redesign. The goal is to release the final version of the updated form in late 2007, to be used during the 2009 filing year (for the 2008 tax year).

In its Redesign Form Teleconference on July 19, 2007, the IRS stated that the redesign was based on three guiding principles: enhancing transparency, promoting tax compliance and minimizing the burden on filing organizations.

To meet these goals, the IRS has revamped the layout of the form. It’s now composed of a core 10-page form that applies to all filers, with 15 additional schedules that apply to only specific organizations. The IRS estimates that 75% of organizations will have to file only one or two of the additional schedules. However, in reviewing the draft forms, many nonprofit experts agree that it appears that only small organizations with little complexity will fall into this category.

Dissecting the form

The first page of the core form is a brief description of the entity and a summary of amounts from other places in the return. The purpose is to provide the reader with a snapshot of the efficiency and effectiveness indicators related to the entity. This allows comparisons between organizations to be made at a glance, enhancing the transparency of the reporting.

The remainder of the core form is devoted to promoting compliance through reporting: 1) detailed information about officers, directors and key employees, 2) revenue and expenses, and 3) program service accomplishments. A new portion on governance was added to identify potential compliance issues resulting from governance and management practices.

Schedules A and B still exist, though Schedule A has been revamped to focus entirely on the public charity status of a Section 501(c)(3) organization.

Following through

Once the new Form 990 is finalized, take the time to familiarize yourself with it so your organization can react to any changes that would be beneficial, such as modifying your general ledger to capture additional information that will now be required. Also acquaint yourself with the governance disclosures so you can make desired changes to your governance policies. For example, one of the questions addresses whether you have a written whistle-blower policy. If your organization doesn’t have one, you might make that change.

Most of the policies and procedures in the governance section of the Form 990 aren’t required to maintain exemption, but remember: The eyes of the world will be looking at your responses. Additionally, you’ll want to thoroughly understand the revenue and expense reporting so that you can design your accounting system to capture the information required.

Understanding will ease transition

The redesign of the Form 990 is a significant change. The more you understand about what the new form seeks to accomplish and how it’s structured, the smoother your transition to the new form will be. •