IRS phases in filing thresholds for new Form 990s

By 2010, the Internal Revenue Service’s new filing threshold for nonprofits that file a Form 990EZ will be $200,000 in gross receipts and $500,000 in total assets. Until then, organizations with gross receipts exceeding $100,000 or total assets of $250,000 or more must file the full Form 990 for the 2007 tax year.

Before this year, nonprofits with gross receipts less than $25,000 did not have to file at all. Beginning with tax year 2007, however, they must file a Form 990-N, called the “e-Postcard.” By 2010, the IRS will raise the e-Postcard threshold to $50,000 in gross receipts.

"This gives small and medium organizations a chance to learn the form and get used to the form. They can fill it out now, but I think this transition will be very, very helpful," said Lois Lerner, the IRS director of Exempt Organizations.

Nonprofits are to use the current Form 990 for the 2007 tax year, which is filed during 2008. The new Form 990, revised for the first time in 30 years, will be used for the 2008 tax year, however. The IRS plans to make instructions for the new 990 available before April 2008.

The IRS has made “an effort to minimize the burden” on nonprofits, Lerner said. The agency received 3,000 pages of public comments since the draft of the new form was released last summer, most concerning the time and effort required to complete the new form.

All nonprofits required to use the new form must complete an 11-page core form. There are 16 additional schedules which must be completed only if triggered by questions about a nonprofit's activities. Gone from the first page of the draft form are metrics and fundraising ratios. Critics said some ratios and certain metrics might provide a skewed picture of a nonprofit. The summary page will now include a two-year look at financial information instead.

Lerner said medium and small organizations wanted executive compensation information to be in the core form so they could easily do salary and compensation comparisons rather than in a separate schedule. This prompted another change, although large organizations will still use the schedule. Some trade associations also suggested there was no compelling tax compliance reason to provide the IRS with the compensations of the five highest-paid employees in addition to that of officers, directors, trustees and key employees, Lerner said.

Click here to find the final Form 990 and background material explaining the changes from the current form and the draft the IRS released last June.