Tate & Tryon's Form 990 Forum

More on E-filing - Tales from the field

One of the sessions during the 3-day AICPA Not-For-Profit Conference held here in Washington D.C. last week dealt with e-filing stories from the field. Of course, all of the stories were about filing the current 990 design, but these issues may continue when e-filing the new form. Here are several things mentioned during the session to make note of:

Elections - some returns were rejected because the 501(h) election on the 990 as filed did not agree with the election status in the IRS datebase. Determine if a Form 5768 was filed sometime in the past to make or revoke the 501(h) lobbying election for the filer. When the correct election status under 501(h) has been determined, document it for future filing years.

Print options - If your software allows your returns to print text in all capital letters regardless of how it was typed into the system, be sure to check the appearance of your returns on Guidestar. There were some instances of the IRS file version posting on-line with text printed exactly as it was typed. Review any previously e-filed returns on Guidestar. Then if necessary reset your print options either at the default level or the individual return level to avoid mixing upper and lower case printing.

Statements - Those helpful "See Statement #" references appear as just a character in the IRS file making it difficult to find the related white paper statement information for line items. This problem will hopeful be corrected for 2008. The new Form 990 design will have many more statement references than there are currently. One preparer worked around this by making one statement an index of all the statements.

Extensions - A few brave practitioners filed their extensions electronically with great success. ProSystem for example can e-file Form 8868 for Form 990, but not for Form 990-T, which also can not be e-filed. In addition, only the first extension can be e-filed. Despite these limitations e-filing of extension forms was worth the effort according to those who used it. Check with your software provider to see if e-filing of Form 8868 is possible.

In general, the session attendees were positive about e-filing, albeit reluctant to give the IRS any praise. With the success of 990-N filing there was general agreement that with the largest entities and now the smallest entities mandated to e-file, the entities in the middle better get ready. With the new 990 format and the success of the new 990-N, mandated e-filing for all 990 returns will be here sooner rather than later.

Subrina Wood

Changes to the Section 403(b) Regulations

In July 2007, the Treasury released the final 403(b) Regulations providing updated and much needed guidance on annuity contracts offered under Section 403(b).  The basic gist of the new regulations is to bring the rules governing the administration of 403(b) plans to be more in agreement with those governing the administration of Section 401(k) plans.  The two most significant changes required under the regulations are the requirement of a written plan document and the curtailment of open-ended contract to contract transfers.

In order for 403(b) plans to be in compliance with the new regulations, plan sponsors will need to be sure that the plan is in writing.  The IRS has announced that they will be providing a sample 403(b) plan document that may be useful to plan administrators in drafting written plan documents.  Unfortunately, the sample plan document is not yet available, but plan sponsors will have until 2009 to have a written plan document in place.  Specific items that need to be addressed in the written plan document include participant eligibility, plan contributions, applicable limitations, contracts available, and the time/form of plan distributions.  Optional items that may be addressed, but are not required include the treatment of plan loans, hardship distributions, rollovers, and the delegation of responsibility for plan administration.

The curtailment of open-ended contract to contract transfers is the other significant change under the new regulations.  Under the new regulations, transfers to other plan types, such as a 401(k) or a 457 are no longer permitted.  Under the new regulations, transfers may only be made to and be received from other 403(b) plans.

There are no questions pertaining to the administration of a Section 403(b) annuity plan on the 2008 core Form 990, however, public charities filing Schedule A for tax years 2007 and before were asked if a 403 (b) annuity plan was in effect (Part III question 3b).  Given the above changes, public charities with a 403(b) plan need to be aware of the new regulations and how they might affect the administration of their plans.   

Start Info-Gathering Now

Everybody knows that the new 990 is going to require more work -- especially more information-gathering. Much of the information you've been gathering (I hope!) all along. But there are some completely new, and some quasi-new, requests sprinkled throughout the form and schedules. What info do you need to get a handle on now? Here's a list. It's not comprehensive, but it's a good start.

For the new Form 990, you'll need to:

• Estimate the total number of "volunteers," for Part I.
• Identify "non-independent" voting members of the governing board, for Parts I and VI.
• Set up policies and procedures, or create them, for chapters, branches and affiliates, for Part VI.
• Develop process for sharing Form 990 with governing board, for Part VI. (final instructions not out on this yet)
• Identify governance policies, or create new ones, for in Part VI.
• Discuss whether to publicly disclose governing documents, policies, financial statements, in Part VI.
• Put procedures in place to coordinate the reporting of political campaign and lobbying financial activity, for Schedule C.
• Examine tax positions for possible FIN 48 issues, for Schedule D.
• Gather info on foreign activities, for Schedule F.
• Identify fundraising and gaming activities, for Schedule G.
• Review executive compensation contracts, to ensure inurement provisions are not being violated, for Schedule J.
• Track 'perks' provided to executives and board members, as well as policies covering such fringes, for Schedule J.
• Gather information on reportable business relationships amongst officers, board members, etc. for Schedule L.
• Gather information on related organizations, for Schedule R.

So, before your CPA even asks . . . get a jump on next year's info request. They'll love you for it -- and you may end up with more hair on your head than you otherwise would.

Debbie