Tax-exempt organizations that have not filed a Form 990 since 2007 remain in danger of losing their tax-exempt status. For calendar year organizations, the first date of automatic revocation began May 17, this year. However, due to the large number of nonprofits still out of compliance, the IRS has granted a one-time special filing extension. As a result, organizations now have until October 15, 2010 to file and retain tax-exempt status. This extension applies to filers of both Form 990-N and 990-EZ.
“We are doing everything we can to help organizations comply with the law and keep their valuable tax exemption,” IRS Commissioner Doug Shulman said. “So if you do not have your filings up to date, now’s the time to take action and get back on track.”
Join us as we clarify the legislation affecting your organization
Earlier this year, President Obama signed into law significant pieces of legislation – the Hiring Incentives to Restore Employment (HIRE Act) and the Health Care Reform legislation (consisting of both the The Patient Protection and Affordable Care Act and the Health Care and Education and Reconciliation Act) – that will impact not-for-profit organizations from a tax perspective. Join us for this webinar as we discuss the following:
As a result of new IRS requirements, chapters of fraternities, sororities, and alumni associations may be required to file an informational return (Form 990) with the IRS on an annual basis. In the past, if a tax-exempt organization’s annual gross receipts were normally less than $25,000, the organization had no filing obligations.
However, under these new rules, most small tax-exempt organizations whose gross receipts are normally $25,000 or less must now file Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required to File Form 990 or 990-EZ. The e-postcard is due each year by the 15th day of the fifth month after the close of the organization’s tax year. For example, if the chapter’s tax year ends December 31, the e-postcard is due May 15. Further, if the year ends on June 30, the e-postcard would be due November 15.
Moody’s Investors Service, the pivotal ratings agency, is adapting like all businesses during the recession. This means, however, that requirements for those organizations in need of a good rating are changing as well. As Inside Higher Ed reports, cash on hand liquidity, once no more than an afterthought for colleges and universities, is now one of the key factors in determining a quality Moody’s rating.
Colleges and universities continue to struggle through the gray areas of new Form 990 reporting requirements. Executive compensation is a strong focus of new IRS scrutiny, however, specific guidance is lacking for several new provisions. Colleges and universities are now required to include certain nontaxable perks in the calculation of compensation packages. As the Boston Globe reports, university-provided presidential housing is creating difficulties in comparison for many institutions.
Colleges and universities vary widely in interpreting the value of a president’s living quarters. Some universities, like Boston University, calculate the full market value of the entire house. BU spokesman Steve Burgay gave no specific reason for their chosen methodology. “We just decided to err on the side of valuing the entirety of the house.”
The federal government has made clear its intention to increase scrutiny and regulation on not-for-profit entities, including an increased number of audits. Most small organizations, however, operate under the false assumption that they will not be audited based on size.
CB&H has learned that a small, local nonprofit in North Carolina recently underwent a three-day audit. Selected at random, the organization had less than $400,000 in revenue and less than $200,000 in assets. The president’s compensation was close to $44,000. The IRS reviewed three years of Form 990 (2007-2009). Included in the documentation requested by the IRS were:
Effective for plan years beginning on or after January 1, 2009, retirement and welfare plans are required to file annual reports on Form 5500 electronically on the EFAST2 system. The Department of Labor (DOL) has recently released an FAQ series on issues related to Form 5500′s electronic filing requirements and EFAST2.
Covered Plans
All retirement plans, with the exception of plans that only cover the sole owner(s) and no other employees, are required to file 5500 electronically. Those few plans not required to file electronically must complete a Form 5500-EZ or 5500-SF.
Among the many changes brought to law by the Health Care Act is the addition of a new code Section 501(r). Lead by Senator Charles Grassley, this legislation comes as the latest in a series of bills designed to put a stricter observance on the tax policies of not-for-profit organizations. Section 501(r) requires tax-exempt hospitals meet certain new requirements to avoid penalties and maintain 501(c)(3) status. The IRS recently issued Notice 2010-39 to solicit comments regarding the application of some of these requirements.
Establish a financial assistance policy
Effective for all tax years beginning after March 23, 2010 (effectively immediately), hospitals must have written financial assistance policies. These must include:
Tax compliance paperwork related to 1099 filings is set to increase substantially for businesses beginning next year. As CNNmoney.com reports, due to changes nested within recent massive legislation, taxpayers can expect requirements for filing drastically expanded from previous norms.
1099-K Within the Housing Assistance Tax Act of 2008, which created the first-time homebuyer’s tax credit, also created a new Form 1099-K. 1099-K was enacted as a way for the IRS to close the “tax gap” by tracking and taxing credit card transactions. Largely focused on large online retailers like amazon.com, any business with 200 or more payments, totaling more than $20,000, will be required to file a 1099-K.
Moody’s Investors Service
Colleges and universities continue to struggle through the gray areas of new 
