In navigating the diverse instructions for Form 990, it is sometimes difficult to track who is included in the definition of “family” for various parts of the form and the accompanying schedules.
Troas Bible College (TBC) 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.
TBC is gathering information for their next Form 990 filing and call to clarify a potential issue on Schedule L, Part IV with regard to a worker who is related to a member of their Board of Trustees. The worker is a professor, who receives a W-2 in the amount of $42,500.
The TBC Accounting Team asks, “Is a Board member’s son-in-law a family member for purposes of Schedule L, Part IV?”
“Great question,” saith we. “And the answer is yes.”
From 2018 Form 990 Glossary:
Unless specified otherwise, the family of an individual includes only his or her spouse (see Rev. Rul. 2013-17 regarding same-sex marriage), ancestors, brothers and sisters (whether whole or half blood), children (whether natural or adopted), grandchildren, great-grandchildren, and spouses of brothers, sisters, children, grandchildren, and great-grandchildren. [Underline added.]
From 2018 Schedule L (Form 990) instructions:
Example 1. T, a family member of an officer of the organization, serves as an employee of the organization and receives during the organization’s tax year compensation of $15,000, which isn’t more than 1% of the organization’s total revenue. The organization is required to report T’s compensation as a business transaction in Schedule L, Part IV, because the organization’s compensation to a family member of an officer exceeds $10,000, whether or not T’s compensation is reported in Form 990, Part VII.
- There is generally a lot of confusion around who – exactly – should be reported on an institution’s Form 990, Part VII – Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors.
- The Glossary to Form 990 (beginning on page 54 of the 2018 instructions) gives specific guidance on who is included in “Family member, family relationship.”
- Many institutions do not realize that workers who meet the definition of family members and receive more than $10,000 in compensation from their school should be reported at Schedule L (Form 990), Part IV.
- Carefully review the instructions and examples in the instructions for Schedule L (Form 990), Part IV if you are thinking your institution might have these types of relationships. (It’s actually pretty interesting reading!)
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.
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