Tax Tips Logo ImageISSUE

For most institutions with fiscal years, your next Form 990-T filing (if applicable) will be on the 2019 form.  Head’s up, the 2020 Form 990-T (draft) is organized differently from what we have seen annually since 1951.

SITUATION

Denali Christian College (DCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

DCC’s CFO called us to ask about the draft 2020 Form 990-T their team was reviewing.  “We just got an update from you on the 2020 Form 990-T and it is really different.  What’s going on?”

“Well, it’s not that different.  We don’t have draft instructions yet – that typically happens in December each year.  The new 990-T for 2020 is certainly organized differently.  The actual Form 990-T has become a “summary” form with new questions (especially in the new Part IV), taxes, and tax payments.  Also, all of the former “schedule” sections have become “parts” of an comprehensive, 4-page Schedule A.  There have been some improvements.  Schedule A is better organized and easier to follow.  It appears that the IRS is tweaking the form to gear up for the required electronic filing requirements, which kick in next year.”

“Okay,” says the DCC CFO, “what about that Schedule M?  Is that still required to be filed?”

“It would appear that the Form 990-T, Schedule M (from 2018 and 2019) will be superseded by the new Form 990-T, Schedule A.  In the top right of Schedule A (Item D), there’s a “Sequence ___ of ___” leading us to believe that organizations would fill out a separate Schedule A for each unrelated trade or business under I.R.C. Section 512(a)(6).”

“It seems if the IRS is making changes that they should incorporate something to do with the 2-digit NAICS codes.  And, what about the recommendations that the Advisory Committee for Tax Exempt and Governmental Entities (ACT) made in their 2014 report?”

“We may see both of those in the future.  First, the regulations are not yet final on I.R.C. Section 512(a)(6).  Next, in the future we certainly hope the IRS is paying attention to the recommendations and the examples provided in the 2014 ACT Report (specifically Appendices B and C).  For now, every institution with a Form 990-T filing requirement should be reviewing the draft 2020 Form 990-T as they complete and/or review their 2019 Form 990-T to consider how reporting might change in the future.”

The draft Form 990-T can be found at:

DRAFT 2020 Form 990-T:  https://www.irs.gov/pub/irs-dft/f990t–dft.pdf

DRAFT 2020 Form 990-T, Schedule A:  https://www.irs.gov/pub/irs-dft/f990tsa–dft.pdf

RULES

From IRS webpage “IRS: Recent legislation requires tax exempt organizations to e-file forms”:

In 2020, the IRS will continue to accept paper forms that are pending conversion into electronic format. These include Form 990-T, Exempt Organization Business Income Tax Return, and Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. The IRS plans to have these returns ready for e-filing in 2021 (reporting on tax year 2020).

BOTTOM LINE

  • The Form 990-T has not been significantly changed (excepting the recent addition of Schedule M) since 1951.
  • The IRS has released drafts of the 2020 Form 990-T and Form 990-T, Schedule A – which appears to replace that Schedule M we saw in 2018 and 2019.
  • It appears that the format changes may be positioning the form for the upcoming requirement for electronic filing.
  • It would be a good idea to review the draft 2020 Form 990-T forms as you complete the current (2019) Form 990-T, if applicable to your institution.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

© 2020 Moja & Company, LLC