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Form 990: Checklist of Required Schedules, Page 4

May 06, 2016

Completing Pages 3 and 4, Part IV of Your Form 990

Although the core Form 990 comprises only 11 pages of information, there are a number of potential schedules that must be attached potentially increasing the total to 30+ pages. Beginning on page 3 (Part IV) there are 38 “yes/no” questions. The answers to these questions will determine whether your organization must attach another schedule with additional information.

Keep in mind when answering these questions that the officer of the organization (the person who signs the Form 990) does so under “penalty of perjury.” Guessing at the answers is not recommended and in our second blog we discuss what it means to sign a document under penalty of perjury. With that being said, the answers to some questions inform the IRS of situations that they would not have known about in the past, unless, they happened to audit the organization. To some extent, organizations are being asked to self-identify if they have engaged in various activities.

A great example of this is question 3. This question asks if the organization engaged in any direct or indirect political campaign activities on behalf of or in opposition to candidates for public office. This is a very sensitive topic, one we cover in-depth in our white paper titled Political Campaign Activity and Lobbying Activity for a 501(c)(3) Organization. Involvement in political campaign activity is strictly forbidden and involvement may result in the loss of your tax-exempt status. Obviously a “yes” answer here and the additional information that must be reported on Schedule C relative to this transaction would likely be a red flag to the IRS.

As a result of the expanded use of questions on the new Form 990, compliance is no longer something that, if found to be lacking, can be corrected prospectively while ignoring the past transgression. The non-compliance will likely have to be reported in the year it occurred by answering the numerous questions asked on the 990 Form.

As a result of the expanded use of questions on the new Form 990, compliance is no longer something that, if found to be lacking, can be corrected prospectively while ignoring the past transgression. The non-compliance will likely have to be reported in the year it occurred by answering the numerous questions asked on the 990 Form.

Not every question has such disastrous consequences and the potential for a loss of tax-exempt status. Most questions ask about activities that the IRS has a special interest in learning more about and when they occur. For example, question 6 asks about donor advised funds including if the organization maintains any donor advised funds and additional information about the administration of these funds in Schedule D. Of course, the mere existence of this question (and others) should alert you to the fact that there are some specific regulations surrounding the question’s subject matter. We always suggest consulting a CPA about the laws and regulations in your area to ensure you are in compliance.

In addition to donor advised funds there is additional information requested if your organization holds conservation easements, maintains collections or works of art or historical treasurers, serves as a custodian for accounts, has an endowment fund, or owns investments, land or buildings (just to name a few).

One question (#12a) asks if the organization was audited. While you might think that a “no” answer to this question is not a good answer, remember, audits are not required by the IRS. The reason why the IRS asks questions such as this is to obtain a profile of the policies and procedures under which the reporting organization is operating. Although an audit is not required, the IRS (and most resource providers) believe that it is better for an organization to submit its financial records to annual audit than to not do so. Therefore, although a “no” answer is acceptable, answering “yes” to this question is preferable.

Read Pt. 5 of our Form 990 series: Compliance Requirements - coming soon!

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