AICPA Recommends Changes to IRS Form 990
by Terri Eyden on
By Christina Camara
The American Institute of CPAs (AICPA) believes the IRS should change Form 990, which is used by tax-exempt organizations to report financial information every year.
Form 990, Return of Organization Exempt from Income Tax, was rewritten in 2008, and some observers say the once-straightforward form has become more complex.
The AICPA believes the IRS should make it a requirement to report income from partnership interests using information from Form 1065, Schedule K-1. It is now optional under Announcement 2012-19. The AICPA says that a number of organizations, especially those with large endowments, have partnership investments that are recorded on a "mark-to-market" basis.
The recommendation letter to IRS stated, "Requiring the use of Schedule K-1 information for Form 990 reporting would generate significant differences between the organization's books and Form 990. This, in turn, would create significant reconciling items on the Form 990 in order to properly report net asset figures that are consistent with the organization's books and records."
On August 16, the AICPA submitted seventeen changes it recommends the IRS make to Form 990.
Among those seventeen, the AICPA believes the IRS needs to:
- Clarify the definition of audited financial statements in the form instructions.
- Change wording on questions relating to policies.
- Clarify the instructions by referencing Department of Treasury regulations on earmarked grants. In cases where one domestic public charity makes grants to another for use abroad, clearer guidance is needed.
- Add a checkbox to one section of the form to avoid duplication of answers.
These high-priority recommendations, along with additional medium- or low-priority items, were made by the AICPA Exempt Organizations Taxation Technical Resource Panel.