Discussion:990 form question
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Discussion Forum Index --> Advanced Tax Questions --> 990 form question
Discussion Forum Index --> Tax Questions --> 990 form question
| 7 February 2008 | |
| I put this in the more complex question because I have been searching for answers for awhile and did not find one. If I missed this - please tell me.
Client is a parent association for the school orchestra - filing 990 and I am just wanting to confirm what "reason for non-private status". I thought about the School - but the school does not support the organization. I am thinking #12 "An organization that receives (1) more than 33-1/3% of its support from contributors, membership fees and gross receipts from activities related to its charitable, etc, functions - subject to certain exceptions and (2) no more than 33-1/3% of its support from gross investment income and unrelated business taxable income (less section 511 tax) from businesses acquired by the organization after June 30, 1075." They collect money from various fundraisers and that is about it. They don't have membership fees. The majority of the money is distributed every year to the students for their travel needs to the various concerts and competitions. Does this sound right? | |
| February 7, 2008 | |
| It sounds like this is a relatively new organization. What was the reason they put down on the 1023? | |
| 7 February 2008 | |
| This is indeed. this is their first 990. I don't know. The new person in charge does not have the paperwork. | |
| 7 February 2008 | |
| Shaunna,
The new person in charge needs to GET the paperwork! The organization is required by law to have on hand a copy of its Form 1023 and the determination letter to be available for public inspection. I can tell you from personal experience that the IRS takes this very seriously. Perhaps the school has a copy of the 1023 and the determination letter. As far as the classification for the 990, either line 11 or line 12 could be correct, depending on what's on the determination letter. The box you check for "reason for nonprofit status" affects the public support calculation, but it is not likely to have much if any effect on this organization. Line 12 seems like the most likely candidate, but it would be best to find the determination letter, which will tell you which line # to check. | |
| February 7, 2008 | |
| I agree with both. When filling in the 990, particularly the Sch. A, you want to fill in the program accomplishments and expenditures right in line with what the 1023 said you'd do! | |
| 7 February 2008 | |
| What are the associations gross receipts for 2007? More than $25,000? And yes the 1023 is very important, and the association's purpose as stated on teh 990 must be in line with it. | |
| February 7, 2008 | |
| Since this is a relatively new organization, there may not yet be a determination letter. I agree the school would likely have a copy of the 1023. If the 1023 hasn't been done yet, there is still likely time to do so. | |
| 7 February 2008 | |
| Yes, I agree with you Natalie, it is possible a 1023 has not yet been prepared. In that case, marking the most likely reason for non private-foundation status on the 990 Schedule A is all that can be done, in addition to marking "application pending" on page one of the Form 990. Then follow up with form 1023 ASAP. | |
| 7 February 2008 | |
| Are annual receipts under $5,000? If so, no IRS approval needed. However, if desiring(c)(3) status, then contributors tend to like actual IRS approval, rather than the org's self-certification. | |
| 7 February 2008 | |
| If receipts are < $5,000, and the organization chooses not to apply for recognition of exempt status, then don't file Form 990 or 990-EZ. The IRS will not accept it. File Form 990-N. | |
| February 7, 2008 | |
| David, where did you get that information from? I have not heard nor read anything about the IRS not accepting 990-EZ simply because gross receipts are < $5,000. | |
| 7 February 2008 | |
| The Form 990 instructions read like an algebraic equation for who files and who does not. I am glad I don't do these anymore. I hope Shaunna can decipher it. May need to get help Shaunna. | |
| 7 February 2008 | |
| If IRS won't accept 990 unless you have approval, it makes sense. It would be the no-cake-and-eat-it-rule of administrative discretion, I imagine. | |
| 7 February 2008 | |
| Natalie,
Sorry if my post wasn't clear. The IRS does not accept Form 990 or 990 EZ from an organization that has not applied for recognition of exempt status. So, if because the orgs gross receipts are $5,000 or less AND because of that, the org chooses not to apply for exempt status, then it should not file a form 990 / 990 EZ. It should file Form 990 N. I used the word AND because both conditions have to be true for the 990 not to be filed. IN other words, an organization with gross receipts of $1,000 that has applied for and received recognition of its exempt status can file a 990 N, 990 EZ, or Form 990, and they will be accepted. | |
| February 7, 2008 | |
| Thank you, David. I missed that all-important word, and. | |
| 8 February 2008 | |
| Thank you all for this fantastic information. I have requested my client send me the 1023 just to be safe. My understanding from discussion with them is that the School is not responsible for the organization nor are they supplying them with any funding. The organization is a High School Orchestra's Parent Organization and they do all the fundraising throughout the year and then give the students their checks for their travel needs. This is the sole purpose of the group. This is why the whole school thing confused me entirely. But honestly I forgot completely about the 1023 and should have requested that from the beginning. I don't have many complicated 990s ( I do however have a kitten oj my desk so if things look weird I apologize).
I will await the 1023 and continue with further questions if necessary. Thanks! | |
| 9 February 2008 | |
| I happened to speak to the IRS Exempt Org support today and they specifically told me that "Booster Club" organizations would check box 12. | |
| 9 February 2008 | |
| Call them again next week and you'll get a different answer;-) | |
| 10 February 2008 | |
| CA - thanks! That was very nice of you. My client faxed me the page of the 1023 that indicates this is correct. So, I am good to go. Thanks everyone!! | |
| 10 February 2008 | |
| Yes, I know I may get a different answer from IRS next time I call :), but I got her ID number and name and she confirmed what I have been doing for years so for now I think we are good with that advice. | |
| 17 February 2008 | |
| I am filing an Exempt Org return for 2006 (back filing for client 5 years) 501(c)(7)all volunteer, under 50K gross receipts. I reviewed the registers and deposits and nothing out of the ordinary. For this year in question one of the board members had serious medical issues and decided to loan himself money from the general account. I am struggling ....make the loan a liability to reconcile? Is this even possible within this type of org? Please be kind this is new to me and my only exempt org. Thank you very much. | |
| 17 February 2008 | |
| If the loan is still outstanding at the end of the year then yes, it will have to be shown as a receivable from the director. Refer to the Form 990 instructions on what info to include in an attached schedule. Transactions of this type between officers/directors/key employees and other disqualified persons must be disclosed so the IRS can be sure the organization is not being taken advantage of.
On another note, you might want to check your state's statutes on loans by nonprofits to officers/directors. I know that in Florida it is illegal for officers/directors to borrow money from a nonprofit http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0617/SEC0833.HTM&Title=-%3E2006-%3ECh0617-%3ESection%200833#0617.0833. But that isn't the case in every state. Sec. 617.0833 of the Florida Statutes. | |
| February 18, 2008 | |
| It is also illegal in Hawaii. Did the board approve the loan? It almost sounds like he just decided to take a loan without other input. Let's hope that's not the case. | |
| 18 February 2008 | |
| Thank you for your imput. This was a board approved loan. I still have research and a phone call to make. | |
| February 18, 2008 | |
| Well, at least he's not doing things behind the board's back. If it turns out the loan is illegal, you might consider recommending each board member read through the nonprofit statutes for the state. I find that often times members agree to be on a board without really knowing what their responsibilities are or what the nonprofit is allowed to do. | |
