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Form 990 Policies and Procedures
State Auditor Guidelines Following some recent public scrutiny of Central Kentucky nonprofits that receive public funding, State Auditor Crit Luallen released some guidelines that all nonprofits should consider as part of their normal operating procedures. Click here to view the letter. It is up to each individual organization to consider what is reasonable and necessary within its operating framework, but the notice should be given careful consideration as you review your policies and procedures. IRS Form 990 Do you file your annual tax form? Many chambers have an accountant who helps them with required IRS reporting. Even the smallest chamber may need to file with the IRS, and this year the Form 990 and Form 990EZ include some new language related to policies and procedures, including:
A whistle blower policy.
3.) Document retention and destruction policy. 4.) Compensation policy and annual review for key staff 5.) Policy for board review of 990 It can be complicated, so consider seeking assistance this year from a local accounting firm member. Here are some resources to help you. What is the Form 990? The IRS Form 990 is titled "Return of Organization Exempt From Income Tax." It is submitted by tax-exempt organizations and non-profit organizations to provide the Internal Revenue Service with annual financial information. A short version, Form 990-EZ, may be used by organizations with gross receipts of less than $100,000 and total assets of less than $250,000. Another variant, Form 990-PF, is available for private foundation organizations. The Form 990 provides the public with financial information about a given organization, and is often the only source of such information. It is also used by government agencies to prevent organizations from abusing their tax-exempt status. In June 2007, the IRS released a new Form 990 that requires significant disclosures on governance and boards of directors. These new disclosures are required for all nonprofit filers for the 2009 tax year, with more significant reporting requirements for nonprofits with over $1 million in revenues or $2.5 million in assets. In addition, certain nonprofits have more comprehensive reporting requirements, such as hospitals and other health care organizations (Schedule H). The Form 990 disclosures do not require but strongly encourage nonprofit boards to adopt a variety of board policies regarding governance practices. These suggestions go beyond Sarbanes-Oxley requirements for nonprofits to adopt whistleblower and document retention policies. The IRS has indicated they will use the Form 990 as an enforcement tool, particularly regarding executive compensation. For example, nonprofits that adopt specific procedures regarding executive compensation are offered "safe harbor" from excessive compensation rules under section 4958 of the Internal Revenue Code and Treasury Regulation section 53.4958-6. Public Inspection IRC 6104(d) regulations state that an organization must provide copies of its three most recent Form 990s to anyone who requests them, whether in person, by mail, fax, or e-mail. Additionally, requests may be made via the IRS using Form 4506-A, and PDF copies can often be found online on sites such as Foundation Center's 990 Finder and Guidestar.org. Click here to obtain a cpy of the Form 990EZ or Form 990 and Schedules. Instructions on completing this form can be found here. Video Guide from the IRS
Review the Form 990 of a hypothetical tax-exempt organization. This case study and a series of videos help guide organizations through completing the new, redesigned Form 990. Also, here are some samples of these policies for your review. Note that these are guidelines. Organizations should consider what is reasonable and required within their own operating procedures. Sample Policies Kentucky Chamber of Commerce Policies:
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