Tuesday, July 28, 2009

Form 990 Filing Requirements

Larger organizations required to file an annual information return are well into the preparation process of the new Form 990 for 2008. Many of these are due at November 15th. However, now is the time for smaller organizations to start preparing for conquering the new form for the 2009 tax year. For 2009, all organizations with gross receipts over $500,000 or assets greater than $1,250,000 will have to file the Form 990. Some of these organizations may not be ready to tackle the new form, so following are some helpful tips.
  • Find a preparer who is preparing several of these forms. This isn't a form that is easy to complete and organizations need competent professionals to help them navigate the form.

  • Have the board adopt a conflict of interest policy, a document retention policy and a whistleblower policy before the end of 2009.

  • Review the composition of the board of directors - does the organization need to increase the number of independent directors?

  • Review the revenue and expense reporting to determine if the necessary information can be easily obtained from the current accounting system.

  • Consider taking a class on the Form 990. This is good even for the executives that are not the "numbers" people of the organization. A three hour course will be offered as a part of the 2009 Ultimate Financial & Legal Conference hosted by my firm October 26th & 27th. There is still time to register.

  • Print the form from the IRS website at http://www.irs.gov/ and see all the information that will be required. Don't wait until it is time to file the form to figure out what it's all about!

With the returns for 2010, all organizations with gross receipts greater than $200,00 will be required to file the full Form 990. Organizations with gross receipts of $50,000 to $200,000 will be filing Form 990-EZ. Organizations with gross receipts of less than $50,000 will file the Form 990-N or the epostcard.

Saturday, July 4, 2009

Hope For The Lost Form 4361

Ministers are allowed to opt out of Self Employment tax by filing Form 4361 with the IRS. There is a slim window of time during which a minister can file the form. After being filed in triplicate with the IRS, the IRS returns an approved copy of the form to the minister.

Whenever I work with a minister that has filed Form 4361, I always tell them it is their most valuable asset. An approved Form 4361 is very difficult to replace. Without the approved form it is hard to convince an IRS agent that the minister is exempt from Self Employment tax. The courts have allowed the exemption without an approved form where the minister has retained proof that he filed the form. Apparently, a Form 4361 that is properly completed and timely filed is rarely not approved by the IRS.

Every year I come in contact with ministers who do not have copies of their approved Forms 4361. To make matters worse, they also do not have any evidence of filing the form with the IRS. In the past, I have had little guidance to give to them regarding how to obtain a duplicate of the approved form. However, the IRS recently published a Minister Audit Technique Guide reviewing all the rules regarding ministers for its agents. One of the sections explains to the IRS agent what to do if the minister cannot provide his/her Form 4361.

The IRS gives its agents three avenues for confirming the exemption:
  1. For ministers who filed the Form 4361 after 1988, the agent can order a transcript for the year under audit. Included on this transcript should be an indicator that tells the agent the minister is exempt from Self Employment tax.
  2. If the transcript is not an option, the agent can contact the Taxpayer Relations Branch at the IRS Service Center where the Form 4361 was filed and request a copy of the form.
  3. The last option is to contact the Social Security Administration in Baltimore and ask them to provide confirmation of a minister's exempt status.
I still believe that an approved Form 4361 is a minister's most valuable asset. I recommend a copy of the approved Form 4361 be given to the minister's CPA as well as placed in with all those other valuable papers, i.e. passports, birth certificates, and social security cards. If you are the minister who cannot find your approved Form 4361, you should explore the above avenues to confirm your exemption. It is better to know for sure you are exempt, then to discover you are not exempt when a large tax bill is sent your way.