IRS Adjusts Disclosure Requirements

As we creep ever closer to tax season, the IRS has announced some changes to its disclosure requirements in an effort to make them easier to understand.

The North Bay Business Journal reported today that, in a recently released Jan. 11 memo, the IRS outlined changes to Form 990 for the 2011 tax year.  While the changes are relatively small, they are designed to help reduce some of the headaches that come with disclosure requirements.  Among the changes is a clarification of what could be considered income for executives and other highly compensated employees, including information from their W-2 forms.  This change should make it easier for nonprofits to know what they need to report when it comes to executive compensation.

Another change that was discussed in the memo involves how nonprofits should treat partnerships on their balance sheet.  It is now required that organizations report the share of assets between the partner organizations as a separate item, showing the ending capital from the joint venture.  The IRS also sought to clarify requirements to foreign activity, which is important for nonprofits that run missions overseas.  Foreign investments can now be valued up to $100,000 before disclosure, whereas organizations were only required to disclose this information if the investments resulted in a $10,000 net revenue or expense.

While all these changes are designed to make the Form 990 easier to understand, it will undoubtedly lead to more work for nonprofits come tax day.  We'd like to hear your thoughts on these new changes.  Do you think they will make things easier, or do you foresee new headaches because of them?

You can read the full story in The North Bay Business Journal.