Avoid Penalties: Make Sure You Have a Complete and Accurate 990!
A recent article by Michelle Michalowski, CPA, called “New Form 990: What’s Confusing Filers?” published in the AICPA’s The Tax Adviser, noted that there were filing errors in approximately 1% of the returns filed for 2010, including incomplete returns. The IRS considers an incomplete return as a return filed late. Late returns incur penalties.
The IRS cites several common errors, many of which are specifically related to the reporting of compensation. The Executive Compensation Compliance Initiative performed compliance checks on over 1,800 exempt organizations. The compliance checks led to almost 800 full investigations. What they found was several errors and omissions related to the failure to file Part V of the 990 which provides details on compensation; incorrect reporting of loans to officers, directors, and key employees vs. loans to other employees; missing supplemental schedules related to compensation and loans; improper reporting of excess benefits transactions with disqualified persons; omissions on Schedule A; and incomplete reporting of officer compensation on Form 990-PF. This initiative is what led to the changes incorporated into the new form 990.
Since the changes to the form were incorporated in 2008, the IRS has found that there are still many reporting deficiencies. One of the most frequent errors is in the classification of officers, key employees, and highly compensated employees. Another is the reporting of only wages rather than all compensation on line 5 of Part IX, and the failure to include the annual increase in the value of defined benefit plans in compensation. The IRS has also found that many organizations erroneously report only unrestricted income on their 990s, rather than all income. This causes problems with the proper completion of both Schedule A and Schedule B. Other very common issues are the improper completion or complete omission of required supplemental schedules and the filing of the incorrect version of the 990.
Many of these reporting errors and omissions, when caught by the IRS, can invite an investigation of your organization. At best, you could be looking at filing penalties. The overall consensus is that filers are confused about how to complete the forms and do not understand the form instructions. Anstiss & Co., P.C., as your advisor, can help you sort out the requirements and make sure you file an accurately completed Form 990.
Anstiss & Co. is a Lowell- based public accounting firm serving clients throughout the United States. The firm was founded by Ray Anstiss, Sr. in 1964, and is currently listed as a Top-35 Accounting Firm in Massachusetts by the Boston Business Journal.
