TAP 03-013

Recommendations for Form 990

Statement of Issue:

Various individuals and groups have discussed with us their concerns about the burdens that the Form 990, Return of Organization Exempt From Income Tax, filing requirements can cause for non-profit organizations, especially newer groups and smaller groups. Their general proposals were that the filing requirements for charitable groups should be decreased and that the filing thresholds should be increased.

Proposal:

(1) The IRS should develop a plain language pamphlet to assist smaller and newer nonprofits in completing the Form 990, including advice on what kind of records to keep, what penalties can be assessed against nonprofits who fail to comply, and what recognized exceptions to the penalties exist.

(2) IRS provides assistance and information for charities and other non-profits through various sources. These include toll free assistance at 877-829-5500, on the IRS website at Tax Information for Charities & Other Non-Profits and through workshops given by field agents in local communities. To better serve the 990 customer, we recommend that the availability of these resources be marketed more boldly. We recommend an "eye-catching" box be predominantly included on all Form 990 related items.

(3) Tax-exempt organizations, especially the newer and smaller ones, do need substantial assistance in order to file a proper Form 990. We recommend the IRS develop a web-based tutorial about completing the Form 990. Until this is available, the IRS should provide links to websites that already have such self-tutorial materials.

(4) To complement the web-based tutorial, the IRS should develop a training video tape or CD which could be made available to non-profits to assist them in completing the Form 990.

(5) We recommend the IRS communication strategy include key messages for the Form 990 customer. Targeting the peak filing periods, IRS should issue press releases via print, e-news and the Digital Daily three times a year. Information to be shared should include filing requirements and obligations, recording keeping and tips for penalty avoidance.

(6) The IRS should market the Form 990EZ more prominently to smaller nonprofits. The web-based tutorial could include a decision tree that could lead smaller organizations to complete the Form 990EZ. Secondly, in the Determination Letter sent to new tax-exempt organizations, there should be a notice alerting them that they may be able to file a Form 990EZ. The IRS should, as with the regular Form 990, develop a web-based tutorial for completing the Form 990EZ.

(7) We strongly urge that the IRS especially where no revenues have been lost to the IRS because of the failure to file or the failure to file a complete return, adopt a standard of "good faith" compliance. We are also convinced that this "good faith" criterion can be incorporated into the present standard of "reasonable cause." So long as a tax-exempt organization has made a good faith effort to comply and the organization moves reasonably to correct any oversights or failures, IRS should not impose daily penalties. Instead, the IRS compliance activities should stress educating the group on its filing requirements and directing the organization to where help is available.

Response Notes:

Steven T. Miller explained point by point each of the panel's recommendations and which have been incorporated in the forms changes for 2004. For those not considered, he explained the rationale for not considering.