At our recent not-for-profit webinar, we covered commonly asked questions about Form 990 with finance leaders and board members across our footprint. Form 990 is a complicated, ever-changing document, requiring the completion of multiple levels of review. Answering the most commonly asked questions, our experts discussed the ins-and-outs of this form with those in attendance. We recap and highlight the top questions below, taking you through several sections of the form:
Program Service Accomplishments – Part III
Q: As it pertains to Line 2, what are some examples of “undertaking any significant program services during the year, which were not listed on the prior Form 990 or 990-EZ?”
A: Think of an organization that has historically provided housing to low income families that begins serving food to the same demographic. An organization with these circumstances would check the box that they undertook a new program and explain the new program on Schedule O.
Compensation – Part VII & Schedule J
Part VII
Q: Who should be reported on Part VII?
A: Report any current trustee, director, officer or key employee, as well as the other five highest compensated employees.
Q: Who are considered directors and trustees?
A: Directors and trustees are members of the organization’s governing body at any time during the tax year that possess any voting rights.
Q: Who is considered an officer?
A: An officer includes any person elected or appointed to manage the organization’s daily operations at any time during the tax year. For purposes of Form 990, the organization’s top management and financial officials should be treated as officers.
Q: Who are considered key employees?
A: A key employee is any employee (other than a trustee, director or officer) who meets all three of the following tests applied in the following order:
- $150,000 Reportable Compensation Test
- Responsibility Test
- Top 20 Test
Q: How are the five highest compensated employees determined?
A: The top five employees are those whose reportable compensation from the organization and related organizations is greater than $100,000 for the calendar year ending with or within the organization’s tax year that are not included in one of the previous categories.
Q: What is being reported in Part VII & Schedule J?
A: This section is always reported on a calendar year basis, meaning you use the W-2 or 1099 that was issued within the fiscal year. Reportable compensation comes from your W-2, Box 1 or 5, and you use the higher of the two.
Q: What is classified as “other compensation?”
A: This includes any compensation paid to an employee that is not included in the W-2 or 1099 reportable compensation number. The most common examples of other compensation include non-taxable health benefits and employer paid retirement match.
Schedule J
Q: Who should be reported on Schedule J?
A: Report anyone whose compensation and benefits from either the reporting organization or a related entity (as reported in Part VII of the Form 990) totals more than $150,000.
Fundraising Events – Schedule G
Q: How do you know if you need to complete Schedule G, Part II?
A: If your organization reported more than $15,000 of gross event fundraising income and contributions on Part VIII, Lines 1c and 8a, you must complete Schedule G, Part II.
Contribution Reporting – Schedule B & Schedule M
Schedule B
Q: What is reported on Schedule B?
A: Generally, you report any contribution over $5,000, or 2% of the current contributions if an organization qualifies for the special rule, in Schedule B, from Part VIII, Lines 1a-h, including government grants and fundraising contributions.
Schedule M
Q: How do you know if you need to complete Schedule M?
A: Complete this portion only if the amount on Line 1g is greater than $25,000.
Unrelated Business Income – Form 990-T
Q: How do you know if you have Unrelated Business Income?
A: Unless an item is included or excluded by statue, you must meet all three of the following requirements:
- The income must be unrelated to your mission or cause, meaning it does not contribute importantly to your mission.
- The activity is a trade or business with a profit motive.
- The activity is regularly carried on or occurs frequently – though it does not have to be ongoing for an entire year.
While we couldn’t cover every question in this article, you can see the recording of this webinar here to listen in and learn more. Contact us if you have any questions, and we’ll be in touch.
About our authors
Jill Boyle
Jill Boyle, CPA, is a director at Sikich with more than 15 years of experience providing tax and compliance services to a variety of clients. She leads the firm’s not-for-profit tax practice, overseeing all tax engagements in this industry. With a concentration in serving not-for-profit organizations and individual taxpayers, Jill dedicates her time to supporting public charities, private foundations and professional organizations. She is an extraordinary resource to clients and provides direction and leadership for the tax team.
Bridgette Mugge
Bridgette Mugge, EA, is a tax manager within Sikich’s not-for-profit practice. In her role, she supports not-for-profit organizations in tax planning, consulting and compliance services. She has nearly 15 years of experience in public accounting.
