In 2008, change isn’t just limited to the presidential election and the Wall Street bailout. The Internal evenue Service also is on the scene this year as it revamps the filing requirements for the not-for-profit sector’s Form 990, Return of Organization Exempt from Income Tax. This revision affects all not-for-profit entities as even the smallest organizations will now be required to file a Form 990-N.

The Form 990 has existed for more than 50 years. The first two-page 990 was filed in 1941 and consisted of three yes/no questions, an income statement and a balance sheet. The current Form 990 has not been extensively revised since 1979 and, according to the Internal Revenue Service, has failed to keep up with the explosion of the number and size of tax exempt entities.

According to the most recent information available from the National Center for Charitable Statistics (http://nccs.urban.org), there are now more than 1.4 million nonprofits in the United States. More than one million of those are 501(c)(3) organizations, but this does not include nonprofits with income of less than $25,000, so the true number is believed to be much higher.

Nonprofit organizations no longer consist only of religious and charitable organizations, but also include social services, literary, scientific and educational organizations, as well as and many others. Tax-exempt entities that have enjoyed the freedom of conducting their charitable cause with little regulation will feel added pressure to substantiate to the IRS and general public their charitable benefit and confirm they are not being conducted for monetary or private gain that is not being retained and used for future programs and services.

The new Form 990, which will be phased in for tax years beginning in 2008 filing in 2009, has been redesigned both in format and content including a front-page summary that, at a glance, will show the main financial and operating information. The new, page-one format includes a section for Activities and Governance, as well as sections displaying prior and current year Revenue, Expenses and Net Assets or Fund Balances. The signature block also has been moved to Page 1 from Page 9 in the 2007 return. These are just a few of the revisions.

One of the biggest changes to the form has been to incorporate a more standardized and consistent method of reporting information that is currently being revealed in ill-defined attachments that are either incomplete or totally missing, even though the 990 instructions clearly describe what the content should contain.

These inconsistencies explain why the number of required schedules has increased from two (Schedules A and B) to 16. The current form’s“unstructured attachments” have been converted into six schedules (D, G, I, J, L, and N); Schedule A has been split into four separate schedules (A, C, E and R) and completely new information is being reported in five schedules (F, H, K, M and O).

The new form also contains a section on governance that will provide information regarding the structure of the organization’s board, its policies, procedures, and how it is held accountable to the public. The board and management of all not-for-profit entities should review their policies and practices now to accurately respond to these questions on their 2008 Form 990.

Each organization that files the new form will complete Part IV, Checklist of Required Schedules, to determine which schedules, if any, it will need to complete.

New for 2008 is the Form 990-N, an electronic filing requirement for small, tax-exempt organizations. Prior to 2008, organizations with gross receipts of less than $25,000 were not required to file except under certain circumstances. All organizations that meet the new 990 threshold requirements will complete the 11-page core form.

The good news is there will be a phase-in process for filing the new form to provide some transition relief for the smaller organizations. The phase-in thresholds (taken from the IRS Web site: http://www.irs.gov) are as follows:

2008 Tax Year (Filed in 2009 or 2010)	Form to File
Gross receipts normally under $25,000	990-N
Gross receipts over $25,000 but under $1 million and total assets under $2.5 million	990-EZ or 990
Gross receipts over $1 million and/or total assets over $2.5 million	990
Gross receipts normally under $25,000	990-N
Gross receipts over $25,000 but under $500,000 and total assets under $1.25 million	990-EZ or 990
Gross receipts over $500,000 and/or total assets over $1.25 million	990
2010 Tax Year and later (Filed in 2011 and later)	Form to File
Gross receipts normally under $50,000	990-N
Gross receipts over $50,000 but under $200,000 and total assets under $500,000	990-EZ or 990
Gross receipts over $200,000 and/or total assets over $500,000	990

Many smaller nonprofits may not have or can afford the guidance necessary to accumulate all the information required for the Form 990. If you are aware of one of these entities, the Unified Chart of Accounts for nonprofit
organizations, is a chart of accounts free to any nonprofit organization, accountant, or consultant. The system is designed so that nonprofits can quickly and reliably translate their financial statements into the categories required by the IRS Form 990 and other standard reporting formats. The Web site to review or download the UCOA is http://nccs.urban.org/projects/ucoa.cfm.

Organizations may be required to report financial and organizational data that day-to-day accounting and record-keeping activities do not portray. It is extremely important to understand the recent changes and the impact the changes have on organizations. Don’t delay — be diligent and review the new form and sign up for update training before the filing deadline to be sure you are aware of the new requirements and have captured the information necessary to complete an accurate return.

Cheryl Yeomans is a Tax Partner in KRG&G, LLP. She can be reached at cyeomans@krgg.com.