In a major revision of IRS Form 990 — the tax exmpt annual reporting form required by all nonprofits — the IRS has released for public comment a discussion draft of a redesigned Form 990, Return of Organizations Exempt from Income Tax. The discussion draft constitutes a significant redesign of the form, which has been revised only on a piecemeal basis since 1979. The IRS anticipates using the form for the 2008 tax year (returns filed in 2009).

The redesign of Form 990 is based on three guiding principles: enhancing transparency, promoting tax compliance, and minimizing the burden on the filing organization.

• Enhancing transparency means providing the IRS and its stakeholders with a realistic picture of the organization and its operations, along with the basis for comparing the organization to similar organizations.
• Promoting compliance means the form must accurately reflect the organization’s operations and use of assets, so the IRS may efficiently assess the risk of noncompliance.
• Minimizing the burden on filing organizations means asking questions in a manner that makes it relatively easy to fill out the form, and that do not impose unwarranted additional recordkeeping or information gathering burdens to obtain and substantiate the reported information.

The public comment period is through September 30, 2007.

The complete draft can be found here.

The IRS is reminding small charities and other nonprofit organizations that, beginning next year (for activity through 12/31/07), they will have to file information annually with the tax agency.

Charities and other tax-exempt organizations that have income of $25,000 or less per year must file the electronic notice, known as the e-Postcard or Form 990-N, to inform the IRS of their current address and contact information.

Organizations that fail to send the IRS an e-Postcard within three years will automatically lose their tax-exempt status and must re-apply for exemption. More information about the Form 990-N is available here.

The Internal Revenue Service has launched a new Web-based version of its popular Exempt Organizations Workshop covering tax compliance issues confronted by small and mid-sized tax exempt organizations.

The free online workshop – Stay Exempt – Tax Basics for 501(c)(3)s – consists of five interactive modules on tax compliance topics for exempt organizations:

• Tax-Exempt Status – How can you keep your 501(c)(3) exempt?
• Unrelated Business Income – Does your organization generate taxable income?
• Employment Issues – How should you treat your workers for tax purposes?
• Form 990 – Would you like to file an error-free return?
• Required Disclosures – To whom do you have to show your records?

Users can access this new training program at www.stayexempt.org. Users can complete the modules in any order and repeat them as many times as they like. The online training website does not require registration and its visitors will remain anonymous.