LETTERS
Lie Detector Test for HOAs - brought to you by the IRS
September
18, 2011
Laguna Wood California- Recently, the Internal Revenue Service
(IRS) added new frequently asked questions (FAQs) on Part VI of Form 990, Governance, Management, and Disclosure. This section of the Form 990 pertains to information about an organization’s governance, management, and disclosure policies.
The
IRS has clarified and added explanations to a number of issues that
have come up the process of completing Part VI. There are twelve
specific questions with explanations on the IRS'
website including:
1.
Generally, all organizations that file Form 990 are required to answer
all of the questions in Part VI. As you will see from the following,
some of the answers can be answered no. However, be careful if you
answer no.
2. In general, the policies and practices described in Part VI are not
required by the Internal Revenue Code. However, the IRS will use the
information reported to assess noncompliance and the risk of
noncompliance.
3. If the instructions to a particular question do not provide a
specific time or period to be used to answer the question, the
organization may take into account practices undertaken after the
close of the tax year in its response to that question. This must be
explained in Schedule O.
4. The organization may answer Yes to any question in Section B of
Part VI that asks whether the organization has a particular policy if
the organization’s governing body adopted the policy by the end of
its tax year.
5. Part VI, Questions 6 and 7, ask whether an organization has
members, and if so what their governance rights are, in order to
provide a more complete and accurate picture about where governance
authority is vested and about the organization’s legal structure.
This applies to organizations that have actual members.
6. An organization is not required to provide a copy of the Form 990
to its board or governing body, or have them review it before it is
filed, however, it is required to answer Question 10 regarding this.
7. The organization must use the IRS definition of independence.
8. The organization need not engage in more than a reasonable effort
to obtain the necessary information to answer the questions regarding
family relationships.
9. The IRS does not plan to provide model or sample policies referred
to in Part VI.
10. Generally, an organization is not required to provide information
regarding the composition of the governing body or policies or
practices of a related organization.
11. Questions on specific policies should be answered yes only if the
filing organization’s governing body has adopted the policies.
12. Form 990-EZ was not revised to include a governance section.
However, question 34 was retained.
The text of
“Form 990, Part VI—Governance, Management, and Disclosure,
Frequently Asked Questions and Tips” can be viewed on the IRS
website at .
Paul
Loughrey
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