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Last week we talked about Part VII of the IRS Form 990: Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors. Some of the individuals listed in Part VII, may also need to be listed on Schedule J. And if an organization answered “yes” on Form 990, Part VII, to questions 3, 4, or 5, Schedule J must be completed.
To help with gathering this information, we’ve attached Schedule J, Schedule J Instructions, and pages 25-27 of the Form 990’s general instructions referred to in the prior week’s email. The latter attachment provides a good summary of the various items to consider when reporting compensation information on either Part VII or Schedule J.
Schedule J: Compensation Information is completed by organizations to provide detailed compensation information for certain current or former officers, directors, trustees, key employees, and highest compensated employees, and certain information regarding the organization’s compensation practices and arrangements.
Part I – Questions Regarding Compensation
Line 1a: Check the appropriate boxes if the organization provided the listed benefits to any of the persons listed on Part VII, Section A.
Line 1b: Answer “yes” if a written policy was followed regarding the provision of those benefits. If your answer is “no”, think about drafting and adopting such a policy so you can answer “yes” next year.
Line 2: Was substantiation of those expenditures required?
Line 3: Check the appropriate box(es) to indicate which methods, if any, were used to establish the compensation of the organization’s top management official.
Line 4a, 4b, and 4c: If any of these answers are “yes”, provide the amounts for each in Part III of Schedule J (one page part with blank lines).
Lines 5-8: Any “yes” answers here also require a description in Part III of Schedule J.
Part II – Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees
It’s best to read the attached IRS instructions to determine which individuals listed on Form 990, Part VII, Section A, should be reported here. If an individual is not listed in Part VII, Section A, they should not be included in Schedule J. And remember that the individuals’ reported compensation is for the calendar year ending with or within the organization’s tax year. |