Opportunity for value-added service: Helping clients prepare for the new Form 990

Draft Instructions for the new Form 990 released by the Internal Revenue Service (IRS) earlier this month could prove challenging to even the most knowledgeable executives and staff at exempt organizations who must file the new form this year. Preparing non-profit clients to file the new form presents an opportunity to client service professionals to offer new, value added services, investmentadvisor.com says.

"The revision is quite extensive," says Bonnie Wyllie, vice president of the tax-consulting division at LaPorte Sehrt Romig Hand CPAs in Metairie in the New Orleans Times Picayune. "The IRS is going to be looking at their compliance, how they're governed, how they're organized and how they operate. They're looking to make sure (executives) are not overcompensating themselves or if not enough money is left to do the charitable mission that they're saying they will do."

An initial value-added opportunity for the accounting professional would be to help clients and prospects assess their policies and procedures with respect to the new governance and compensation reporting requirements, investmentadvisor.com says. The professional may suggest that organizations:

• Review and, if necessary revise their governance policies and practices
• As appropriate, adopt policies and procedures to address issues covered in the new form, such as whistleblowers, document retention, and compensation;
• Develop and implement new internal tracking and reporting procedures to capture relevant information.

Matters relating to Governance, management and disclosure are covered in Part VI of the core form part of the draft Form 990 instructions. The IRS provides guidance relating to the independence of board members in this section, as well as conflict of interest policies, document retention and whistleblower policies. Instruction is also provided for answers to 990 questions about the organization’s process of determining compensation.

Some executives and board members may balk at the nature of the compensation information they are required to provide, but accountants should help them become familiar with the detail required for compliance well in advance of the 2008 filing. Matters relating to compensation are covered in Part VII of core form part of the draft instructions

The core form instructions clarify that reported compensation should include W-2 or 1099 compensation and other compensation, including that received from related organizations.

The instructions say that non-profit organizations are now required to list the following officers, directors, trustees, and employees of the organization whose reportable compensation from the organization and related organizations (as defined in the Schedule R instructions) exceeded the following thresholds:

  • current officers, directors, and trustees (no minimum compensation threshold)
  • current key employees ($150,000)
  • current five highest compensated employees other than officers, directors, trustees, or listed key employees ($100,000)
  • former officers, key employees, and highest compensated employees ($100,000)
  • former directors and trustees ($10,000 in the capacity as a former director or trustee)

    Schedule J, which covers compensation information, also contains two forms that help to classify income. The schedule asks for a description of specific types of compensation including first-class travel, companion travel, and gross-up payments to cover taxes housing allowances, club dues, and personal services.

    Schedule H provides 23 pages of instructions for hospitals. Non-profit hospitals with complex financing, or subsidiaries, or multiple facilities will be required to provide much more detail on the new 990, the Times Picayune reports.

    Wyllie told the Times Picayune that she is telling her clients to prepare for the change as if they are preparing for an audit. “It’s going to take a lot of work but they need to do it now,” she said. That way they can change or set policies as needed before the file their returns.


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