IRS Releases New Draft Instructions to Form 990

The Internal Revenue Service (IRS) IRS has released a second draft of instructions for the new Form 990, Return of Organization Exempt from Income Tax. According to the IRS, the instructions will not significantly differ in content when they become final later in 2008. Because of the extensive overhaul of the form and consequently the instructions, the IRS wanted an accurate draft released early so exempt organizations and practitioners could prepare for the changes. The new Form 990 will be required for the 2008 tax year, although some transitional relief is allowed for organizations with gross receipts under $1 million and total assets less than $2.5 million (for tax year 2009, relief is granted to those with gross receipts under $500,000 and total assets less than $1.25 million). The revised instructions provide clarity in many aspects of the form, but especially in the definition of "key employee." Management companies and similar entities that are independent contractors are not considered key employees. However, their top management officials and top financial officials are considered officers and are reported as such.