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APRIL
2004 |
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 A
Message from EDIN
Congratulations to the many nonprofit leaders, professional
accountants, the Electronic Tax Administration, and IRS
Exempt Organizations Office on last month’s launch
of e-filing for the Forms 990 and 990-EZ. It’s been
a long road and much has been accomplished to improve nonprofit
reporting. Now we look ahead to the final hurdle: providing
the incentives for nonprofits and their accountants to
file the 990s electronically.
Software
is beginning to be available: Currently,
one commercial software package for
e-filing the Form 990 is available
(Creative Solutions/UltraTax990), which
is profiled in this month’s newsletter
(See “What’s
Developing”). A second option – a
web-based application for the 990EZ – is
available free from the National Center
for Charitable Statistics (Desktop990EZ)
and was highlighted in the February
newsletter. Software testing is
ongoing, and additional software products
for e-filing the 990 are expected to
be available later this year and in
2005.
In
letters to the IRS and ETA, EDIN urged
additional incentives for software
developers, practitioners and filers,
and coordinate its plans for a state
retrieval system with other technology
initiatives to integrate federal and
state reporting, management and information
sharing of nonprofit data.
Dan
Moore, vice president of public affairs
at GuideStar and a member of EDIN’s
steering committee, recently summed
up the challenges ahead: “We
need to caution the IRS and states
to prevent replacing the current complexities
and expense of a paper-based system
with an equally complex and expensive
patchwork of electronic systems.”
With
the launch of e-filing, EDIN is in
the process of calling together leaders
in nonprofit reporting to recommend
ways to address the final obstacles
that inhibit widespread adoption of
e-filing: the availability of Form
990 e-filing software; federal-state
integration of reporting demands; and
coordination among state charity offices
for reporting, managing and sharing
nonprofit data.
Keep
the pressure on software developers
to update their tax preparation packages
for 990 e-filing, and let us know if
you plan to e-file your Form 990 this
year.
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E-filing
Your 990: How To's
by Midori
Morgan-Gaide,
Manager, IRS EO Electronic
Initiatives Office
Exempt
Organizations
If you are an exempt organization interested in e-filing
your return this year, all you or your preparer have to do
is use IRS
Approved Software and choose e-file to
send your return electronically. You do not need to register
directly with the IRS!
You
will need to fill out some paperwork
to “sign” your return.
An officer of your organization must
complete Form
8453-EO, Exempt Organization
Declaration and Signature for Electronic
Filing and attach an image of
the signed form with your return.
You
can also choose the pin/password option
to create a digital signature. To choose
this signature option, an officer of
your organization must complete
Form 8879-EO, IRS e-file Signature Authorization for
an Exempt Organization.
Software
Vendors & Practitioners
Software vendors and practitioners can apply with the IRS
to become an Authorized e-file Provider. The application
involves completing a Form
8633, Application to Participate in the IRS e-file
Program and passing the Suitability Background Check. IRS
Publication 3112, IRS e-file Application Package contains
more specific information about both steps. In addition, Publication
4206, Modernized e-File Information For Authorized
IRS e-file Providers for Exempt Organization Filings,
provides authorized e-file providers with the specific requirements
and procedures for participating in electronic filing.
May
15 is just around the corner…If
you are an exempt organization that
would like to file your Form 990, 990-EZ
or request an extension to file on
Form 8868 electronically, all you have
to do is ask your software vendor or
practitioner if they are an authorized
e-file provider. For more information,
visit www.irs.gov/e-file and
click on “e-file for Charities
and Nonprofits” or call the IRS
toll-free at 866-255-0654.
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of contents
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Firm-wide
Integration of Accounting Software
will Drive 990 E-filing
As
a member of the AICPA Exempt Organizations Taxation Technical
Resource Panel, Deborah Kosnett, CPA, with Tate & Tryon,
had cautioned the IRS that it might prove difficult to provide
an incentive for exempt organizations and their tax preparers
to e-file their Forms 990. For one thing, it might not be
cost-effective for an accounting firm to purchase a stand-alone
990 e-filing package, or switch to a software package that
includes e-filing. Additionally, as software vendors typically
charge accounting firms extra for e-filing, some firms may
pass that charge along to their clients, and some organizations
may not wish to pay extra for the privilege of e-filing.
Last
year, Kosnett expected that most or
all the major software providers would
be on board with 990 e-filing products
when e-filing launched. But the filing
season for 2003 annual information
returns will begin shortly and the
software package her firm uses – CCH’s
ProSystem fx Tax – does
not include e-filing capability for
the Form 990. While
other 990 e-filing software is available – Creative
Solutions’ UltraTax 990 and a
free, web-based application for the
Form 990-EZ from the National Center
on Charitable Statistics – Tate & Tryon
cannot afford to switch packages at
this time, especially as her firm also
uses ProSystem fx Engagement,
CCH's auditing software, which is integrated
with ProSystem fx Tax.
“We
don’t want to have to take a
step backwards in terms of 990 software
and software integration,” says
Kosnett, who has found ProSystem fx to
be “pretty impressive” in
supporting all the business needs of
Tate & Tryon’s clients, and
will therefore wait until CCH adds
Form 990 e-filing capability to its
tax preparation package.
She
is still wary of how the reporting
process for nonprofits will transition
to an electronic environment, and noted
that at this time, most software packages
don’t support exempt organization
reports, or 990-T-related income tax
returns, for most states, and she wonders
if future software packages will ever
offer such expanded capability. Still,
she believes that e-filing 990s, if
it is as easy as e-filing 1040s, will
be easier, in the long run, than paper
filing is today.
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Eileen
Marxen Named California's New Registrar
In
January of this year, Eileen
Marxen was appointed Registrar
of the Attorney General's
Registry of Charitable
Trusts. “One of my
goals is to re-automate
the Registry functions
to make it more responsive
to the sector, the public,
and the regulatory and
enforcement efforts of
the Charitable Trusts Section,” says
Marxen, who had been a
financial auditor in the
California Attorney General's
Office, False Claims Section
after nine years in the
California State Treasurer's
Office, where she worked
on the State's bond program.
California
accounts for about
12 percent of all Form
990s filed nationally.
More than 80,000 charities
are registered in the
state of California
with the Attorney General’s
office, 43,000+ of
which file informational
tax returns (Forms
990, 990EZ and 990PF).
The documents are scanned
and stored in a database
and accessible from
the Registry
of Charitable Trusts’ website.
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"Building
a Market for E-filing Will Require the IRS
to Build in Some Incentives for Customers,
Practitioners," Says Creative Solutions
Marketing VP
At
the time EDINews went to
press, two software developers
passed IRS assurance testing
for 990 e-file. The first
out of the box – a
week before the IRS officially
launched e-filing for the
990 – was Creative
Solutions.
A
business unit of Thomson
Tax & Accounting
(TTA), Creative Solutions
positions itself as
a technology leader
in the marketplace
whose customers include
the entire professional
market. “Our
goal is to be slightly
ahead of the market
to have advanced technology
products available
for professional tax
preparers, so we’re
going to be on the
leading edge of capabilities
such as electronic
filing,” says
Jack LaRue, vice president
for marketing.
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The
adage that
compares
sausage making
to legislation
might be
said about
developing
tax software
as well.
No one knows
that better
than those
who gathered
earlier this
month at
the National
Association
of Computerized
Tax Processors’ (NACTP)
spring meeting
in Las Vegas,
where the
conversation
at the session
on e-filing
centered
on the frustrations
of not having
enough development
time to assist
the IRS in
the rollout
of modernized
e-file and
meet state
mandates.
While the
Form 990
is one of
the new forms
included
in the IRS’s
February
release,
the bigger
market for
e-filing
are the Form
1120 series
(U.S. Corporate
Income Tax).
Rebecca
Harris,
chair
of NACTP’s
e-filing
committee
and assistant
manager
of electronic
filing
development
at CCH,
Inc.,
makers
of ProSystem
fx, acknowledged
that
CCH hopes
to, at
some
point,
program
its Form
990 software
for e-filing,
but getting
software
updated
in time
to meet
state
mandates
was a
higher
priority: “If
we didn’t
have
our software
ready
in time
to meet
state
mandates
for e-filing,
our customers
would
be screaming
for them.” In
contrast,
she says,
while
CCH heard
from
a few
Form
990 clients,
we “haven’t
heard
a lot
of clamoring” for
990 e-filing
software.
According
to Harris,
NACTP
members
are paying
close
attention
to the
IRS’s
plans
for a
state
retrieval
system,
and were
interested
in learning
about
NASCONet,
a web-based
state
charitable
reporting
and information-sharing
system
that
is being
planned
by GuideStar
and the
National
Association
of State
Charity
Officials.
Dan Moore,
vice
president
of public
affairs
at GuideStar,
spoke
with
NACTP
members
on behalf
of EDIN,
and highlighted
the need
for software
to incorporate
state
reporting
demands.
“We
can program
generic
information
and create
a separate
area
for individualized
information,
but if
we can
get the
states
to agree
on a
common
scenario,
standardize
the information
they
require,
and have
everything ‘enveloped’,
we can
offer
software
for more
states,” says
Harris.
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Creative
Solutions’ customers
are loyal – 95%
of its customers re-purchase
software for the subsequent
filing year. But it
will take more than
the availability of
software to get practitioners
to adopt e-filing as
their standard way
to file. “Building
a market for e-filing
is going to require
the IRS to build in
some incentives for
the customers and practitioners,” says
LaRue. “Mandates
are effective but it
doesn’t produce
good long-term relations.”
LaRue
predicts that electronic
filing will not be
fully adopted until
practitioners are able
to electronically file all their
customer’s needs. “Advocates
of electronically filing
talk about the simplicity
and benefit to an individual
customer but the professional
market doesn’t
look at it that way;
it looks at the impact
across its entire business,” says
LaRue. “Electronic
filing is driven by
the 1040s – that’s
where the volume is.
Professional tax preparers
and accounting firms
are production shops.
With the addition of
the 990s and 1120s
for e-filing, and with
e-filing available
in more states, it
will become easier
for a firm to incorporate
electronic filing across
all their business
processes.”
Different
requirements at the
state level hinder
full adoption of electronic
filing as well, and
filing in multiple
states is quite common. “There
needs to be a holistic
approach to electronic
filing that takes into
account the impact
on the professional
marketplace and on
the states. It has
to be coordinated and
simple. This is where
we need to go,” says
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