IRS Releases Instructions for Redesigned 2008 Forms 990

The final piece to sweeping new compliance rules for tax-exempt entities has been released. Some people say, "It's about time" while others are saying that "it's come too late." The timing is controversial because compliance is required for 2008 returns that will be filed in early 2009. The complaint is that 2008 is already more than half over.

Revised instructions to be used by tax-exempt organizations in completing the redesigned Form 990, Return of Organization Exempt From Income Tax, were released by the IRS on August 19th. Redesigned Form 990 itself had been released in December 2007. The redesigned form consists of a core form to be completed by all organizations and 16 schedules to be completed depending on the organization's type and activities.

The new form and schedule will take many exempt organizations many hours to complete, many weeks to gather the correct information, and many months to put the procedures in place necessary to come up with the correct information. Transition rules apply to give relief for small organizations to adjust to the new form; no other concession has been given. For the 2008 tax year, only organizations with gross receipts less than $1 million and total assets less than $2.5 million may chose to use Form 990-EZ, the unrevised "short form."

Upon release of the latest instructions, experts immediately noted the burdens placed on exempt organizations to meet the new reporting requirements. The new Form 990 requires a lot more information from charities that file the form. The complexity is evident from the very first page of the instructions. The American Bar Association, for example, commented that "this is complexity that doesn't need to be there."

The IRS has identified approximately 1.3 million public charities and other non-charitable exempt organizations. These numbers have exploded in recent years and with them a growing number of abuses by those who operate some of these organizations for their own personal gain. Congress has encouraged the IRS to end these abuses so Americans who contribute to charities and other exempt institutions know that their money (and the tax exemption) is being used properly.

(IR-2008-98)