Tax Tips Logo ImageISSUE:

As we mentioned in September, the 2020 Form 990-T (draft) is organized differently from what we have seen annually since 1951.  Now, the IRS has released the draft instructions for the 2020 Form 990-T.

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 to ask if we’d heard any updates with regard to the draft 2020 Form 990-T and the new Form 990-T, Schedule A.

We told her that the IRS has recently released the draft 2020 Form 990-T instructions.  The “What’s New” section of the instructions reminds filers that “Mandatory electronic filing of the 2020 Form 990-T will begin in February 2021.”  In addition, the draft alerts filers that the Form 990-T has been “redesigned for tax year 2020.”  The instructions are 34 pages long and include three appendices (with Appendix A, Definitions).  Also, there is a set of “Reminders” on page 2 that should be closely reviewed.

The draft 2020 Form 990-T instructions can be found at:

2020 Instructions for Form 990-T (irs.gov)

 

RULES:                                                                        .

From 2020 Form 990-T Instructions (DRAFT):

Form 990-T has been redesigned for tax year 2020. Each unrelated trade or business of an organization has a separate Schedule A attached to the return, with a list of how many Schedules A are attached. At the organization’s election, each separate trade or business may be classified by a 2-digit North American Industry Classification System (NAICS) code. Proposed Regulation section 1.512(a)-6(b)(1), 85 Fed. Reg. 23196 (April 24, 2020) (allowing use of 2-digit NAICS codes in tax years beginning after April 23, 2020). Different rules apply for investment income.

The Definitions section has been moved to Appendix A.

 

BOTTOM LINE:

  • The Form 990-T has received an overhaul for 2020.
  • The IRS released a draft of the 2020 Form 990-T instructions (including guidance on filing the new Schedule A(s)) on December 2, 2020.
  • Electronic filing of Form 990-T is set to begin in February 2021.
  • It would be a good idea to review the draft 2020 Form 990-T forms and instructions as you complete the current (2019) Form 990-T, if applicable to your institution.

 

Specific questions? Email Dave Moja

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