Changes To Form 990 – Here’s What You Need To Know

COVID-19 is a global phenomenon which has affected people worldwide. With the USA being the worst affected, it is only natural for the IRS to come up with tax-reliefs in this time of need. Relief granted has been all-around with the relaxation of tax-filing deadlines, broad tax filing etc.

This relief has been extremely beneficial for organizations that fall into the list of companies exempted from paying Income Tax. With the latest changes brought into effect by the IRS, these organizations have now been allotted 3 months extra for the filing of Form 990.

Generally, these tax-exempt organizations had a period of four and a half months to file Form 990 post the ending of their fiscal year. These mostly included non-profit organizations that operate from January to December and ended their fiscal year on the 31st of December.  But with the extension, these charitable organizations have until the 15th of July 2020 to file Form 990. The relief provided comes at a very appropriate time since they are focused on providing humanitarian relief across the country. Thus understanding the changes that have been effected in the year 2019 for the filing of Form 990 no longer create pressure on these organizations.

Changes effected in Form 990 in 2019 explained

Nonprofit organizations either having assets amounting to $500,00 or more or those that have gross receipts amounting to $200,00 or more, need to file Form 990 as mandated by the IRS. The changes that were introduced for these organizations for filing Form 990 in 2019 are:

• Form 990 needs to be electronically filed for by all exempt organizations that have their tax year staring either on July 2nd 2019 or after it. Thus charitable organizations ending their fiscal year on December 31st will have to file their 2020 tax year Form 990 electronically. This makes 2019 the last year for paper filing of Form 990. However, there are certain limited exceptions wherein paper filing by these exempt organizations is permissible such as:
  • In the year wherein an organization undergoes a name change,
  • If Form 990 represents a very short period because of changes in the exempt organization’s accounting period,
  • If the application for an organization’s tax-exempt status is still pending,
  • Form 990 filing is required before year-end,
  • If the organization received a rejection notice from the IRS after filing the Form 990 electronically.
• In Part IV of the required schedules checklist, line numbers 26 to 28 pertain to party transactions. These transactions have been expanded to also include those individuals who can be termed as either “creators and founders” or “substantial contributors”. This change was more of a clarification of what Form 990 wanted to know from the taxpayers.
• In Part X relating to the Balance Sheet, line 5 talks about related party receivables while line 22 talks about related party payables. This too has been expanded to specifically include:
  • Creators and founders,
  • Substantial contributors,
  • 35% of controlled entities and
  • Family members of the above-mentioned persons.
•  Another updates of Part X states that the Balance Sheet needs to include net assets both with donor restrictions and that without the same. This has been done to make it sync in with the FASB issued ASU 2016-14 which aimed at improving the NFP or not-for-profit entity’s financial reporting. In the previous years, this section consisted of 3 separate lines for disclosure related to net assets that are either unrestricted, temporarily restricted or permanently restricted.

The change in the filing date will make it a lot easier for these non-profitable tax-exempt organizations to understand the changes effected in 2019 and file the form accordingly

There’s lot going on and the situation is prerry dyamic. Feel free to write to us at [email protected] or call us on +1 (201)-355-2627 for assistance.