Spring 2009 issue of Horizons

Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

An interested person may be a current or former officer, director, trustee or key employee and also may include family members and certain business entities related to such persons.

• Have a plan for collecting and organizing the compensation data needed to complete the various parts of the return. The Form 990 is typically due well after the due date for Forms W-2 and 1099-MISC. Related party information may need to be requested if the filing organization is not in custody of those records. Fringe benefit reporting is covered in depth in the instructions, and each benefit may need to be valued. For organizations that do not use the calendar year as their fiscal year, there will be different reporting years within the form depending upon which part of the form is being completed.

Conclusion

The IRS agenda for transparency and good governance practices for tax-exempt organizations has resulted in massive changes in the reporting required on Form 990. The imposition of uniform definitions, including a glossary in the Form 990 instructions, and uniform sources of compensation data based on Forms W-2 and 1099- MISC will provide an objective basis for reporting and may make it easier to compare the compensation paid by two different organizations. There also is a renewed emphasis on payments by related organizations and transactions with related parties. The IRS has taken the opportunity to expand the reporting requirements of tax-exempt organizations other than Section 501(c)(3) organizations. There is some relief to taxpayers in that the $50,000 threshold for highly paid employees and the top paid independent contractors has been increased to $100,000. In order to properly prepare the compensation sections of the 2008 Form 990, organizations need to ensure the following steps are taken: • Verify the organization is correctly applying definitions such as officer, key employee, interested persons and disqualified persons. Review the process for identifying these parties on an ongoing basis. • Develop disclosure statements that are responsive to the questions on the return (Part VI and Schedule J), especially with regard to policies and procedures. The IRS admits that the tax laws do not necessarily specify particular governance practices, but the IRSmay select returns for audit based on the disclosure statements and also may assess penalties for inaccurate or incomplete answers.

For assistance with your particular situation, please contact us.

Questions? Contact:

Judy Murphy, CPA Partner-in-Charge Not-for-Profit Services Group 314.290.3496 judy.murphy@rubinbrown.com

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