By Keiter CPAs
By Brittany Aerni, Tax Senior Associate | Not-for-Profit Team
Each year at tax preparation time, your tax advisor or auditor should request an updated listing of your board of directors. Does your organization have each member categorized correctly, according to their title, duties, and salary? Are there other employees that should be listed on page seven of the 990 that aren’t board members?
The six IRS categories and definitions are as follows:
- Individual Trustee, or Director – member who serves on the organization’s governing body at any time during the tax year and has voting rights
- Institutional trustee – member that is an organization, such as a bank or trust company who serves on the organization’s governing body at any time during the tax year and has voting rights
- Officer – member elected or appointed to manage the organization’s daily operations. Typically, any member who at any time during the tax year serves in one of the following capacities:
- President, Vice President, Secretary, Treasurer, or sometimes Board Chair (usually defined in the organization’s governing documents)
- Top management official (i.e., CEO, executive director)
- Top Financials official (i.e., CFO)
- Key employee – person who meets all three of the following:
- Receives $150,000 or more in compensation for the calendar year from the organization and all related organizations
- Has responsibilities or influence over the organization as a whole or manages an activity that represents 10% of the assets, income or expenses of the organization
- Is one of the 20 employees who satisfy both a) and b)
- Highest Compensated Employee – Top five highest paid employees who receive more than $100,000 in compensation for the calendar year, from the organization and any related organizations. This does not include the key employees already stated.
- Former – member who was reported on one or more of the past five years’ tax returns as any designation, except “highest compensated employee” AND received compensation from the organization during the current calendar year of $100,000, if a former officer or key employee or $10,000, if a former director. Similarly, any member reported at least once on the last five years tax return and who is still employed at any time during the organization’s tax year either at a lesser capacity or at a related organization and meets the compensation thresholds, must be disclosed as “former”.
Additionally, a board member may hold only one designation at a time, except for being both an “officer” and “individual, trustee, or director” simultaneously and a “former” of one of the other five designations.
Instructions for Form 990 Return of Organization Exempt From Income Tax. December 06, 2016. Accessed August 21, 2017.
About the Author
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.