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IRS Advisory Panels Calls for Review of Charity Form 990, Mandatory E-Filing

The Advisory Committee on Tax Exempt and Government Entities (ACT) has recommended three proposals to the Internal Revenue Service (IRS), including mandatory electronic of the Form 990, the information return charities and nonprofits must file every year. 

The purpose of the ACT is to provide an organized public forum for the discussion between IRS officials and representatives of five areas: Employee Plans, Exempt Organizations; Federal State and Local Governments; Indian Tribal Governments; and Tax Exempt Bonds.

Regarding exempt organizations, including charities, the ACT recommends:

  • A Congressional mandate to require electronic filing of the Form 990 series and the development of interim steps to encourage and provide incentives for voluntary e-filing of the Form 990 series for exempt organizations that are not subject to the mandatory e-filing requirements.
  • A task force comprised of representative stakeholders to determine which parts and schedules of the current Form 990 and related instructions should be updated, enhanced, and/or deleted to create a more effective and efficient form and process.
  • Additional information from Form 990-N filers, an “e-Postcard” that requires only limited information from nonprofits whose annual revenues are normally less than or equal to $50,000.

“In this day and age with the technology that is available, we simply have to use every means to have charities file their annual information electronically,” said Andrew Watt, FInstF, member of the ACT and president and CEO of the Association of Fundraising Professionals (AFP). “The 1.4 million organizations of the nonprofit sector have become a huge force not just in providing services and changing people’s lives, but in the significant impact they have on our economy—with one in ten Americans employed in the sector. We need to have accurate and updated information to ensure the reach of the sector is understood by our government, and that appropriate public policy can be established to support charities and their critically needed programs.”

The ACT’s recommendations are buoyed by more than 1,900 responses to a survey that was distributed to user groups of the Form 990 highlighting multiple uses of the form. Just two percent of respondents said mandatory electronic filing would be burdensome (six percent of Form 990-EZ filers said they find it burdensome), with 58 percent saying it wouldn’t burdensome and 40 percent responding “don’t know.”

In addition, President Obama’s 2016 Budget included a proposal that all-tax exempt organizations to file all kinds of Forms 990 electronically. 

“It’s clear that there is strong consensus from charities, the government and others that we need electronic filing,” said Watt. “Funding for the IRS—and the burden mandatory e-filing places on the agency—may be an issue, but the benefits here far outweigh the negative, both to the sector and the IRS’ effectiveness and efficiency in the future.” 

A copy of the report, including all of the recommendations and more information on the survey, is available on the IRS website

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