form 990 schedule g instructions

3 min read 02-12-2024

Form 990, Schedule G, is a crucial component of the annual information return for many tax-exempt organizations. This schedule is specifically designed to detail the organization's compensation, benefits, and other payments made to its officers, directors, trustees, key employees, and highest-compensated employees. Understanding and correctly completing Schedule G is vital to ensure compliance with IRS regulations and avoid potential penalties. This guide provides a comprehensive overview of the instructions and process.

Understanding the Purpose of Form 990, Schedule G

The primary purpose of Schedule G is transparency. It requires tax-exempt organizations to disclose information about the compensation and benefits paid to those individuals who hold significant positions within the organization. This level of transparency helps maintain public trust and allows the IRS to ensure compliance with rules concerning excessive compensation for tax-exempt entities. Failing to properly complete this schedule can lead to significant consequences.

Key Individuals Reported on Schedule G

Schedule G demands detailed reporting on several key individuals. This includes:

Officers: Individuals holding official positions within the organization, such as President, Vice President, Secretary, etc.
Directors: Members of the organization's governing board.
Trustees: Individuals who hold fiduciary responsibility for the organization's assets.
Key Employees: Individuals who hold significant responsibilities within the organization, regardless of their title. The IRS provides guidelines to help determine key employee status.
Highest-Compensated Employees: The five individuals receiving the highest compensation during the tax year, regardless of their position or title.

What Information Must be Reported on Schedule G?

For each individual listed above, Schedule G requires detailed information including:

Name: The full legal name of the individual.
Position: Their official title or role within the organization.
Compensation: Total compensation, including salary, wages, bonuses, and other forms of payment.
Benefits: The value of all benefits received, such as health insurance, retirement contributions, and other perks.
Reportable Compensation: This represents the total compensation and benefits reported to the IRS.

Navigating the Schedule G Sections

Schedule G is structured to guide you through the reporting process. It’s crucial to understand each section:

Part I: Compensation of Officers, Directors, Trustees, and Key Employees

This section focuses on the individuals listed earlier and requests the specific information detailed above for each person. Accuracy is paramount; any discrepancies can lead to IRS scrutiny.

Part II: Compensation of Highest-Compensated Employees

Here, you report on the five highest-compensated employees, regardless of their position. Even if these individuals are already reported in Part I, they must be included here. This part helps to provide a broader picture of the organization's compensation practices.

Part III: Other Information

This section requires additional information to enhance transparency, including details about:

Excess Benefit Transactions: Transactions that may result in excess benefits being provided to disqualified persons.
Loans to Officers, Directors, Trustees, or Key Employees: Outstanding loans made to these individuals.

Tips for Completing Form 990, Schedule G

Maintain Accurate Records: Keep meticulous records of all compensation and benefits paid throughout the year. This will simplify the completion of Schedule G significantly.
Seek Professional Guidance: If you're unsure about any aspect of completing Schedule G, it's advisable to consult with a tax professional specializing in nonprofit organizations. They can provide valuable assistance in ensuring compliance.
Review IRS Instructions Carefully: The official IRS instructions provide detailed guidance on each section and requirement of Schedule G. Thorough review will minimize errors.
Double-Check Your Work: Accuracy is crucial. Review the completed schedule carefully before filing to identify and correct any potential mistakes.

Penalties for Non-Compliance

Failure to accurately and completely file Schedule G can result in substantial penalties. These penalties can include:

Monetary Fines: Significant financial penalties imposed by the IRS.
Loss of Tax-Exempt Status: In severe cases, the organization may lose its tax-exempt status.
Reputational Damage: Inaccurate reporting can damage the organization's reputation and public trust.

Completing Form 990, Schedule G accurately is not only a legal requirement but also demonstrates the organization's commitment to transparency and good governance. By following these guidelines and seeking professional help when needed, you can ensure compliance and maintain your organization's tax-exempt status. Remember to always refer to the most up-to-date IRS instructions for the current tax year.