Reporting Officers and Directors on Form 990

Posted on Wednesday, May 12, 2021

The board of directors is the governing body of a nonprofit and ultimately responsible for the organization’s activities. This is why it is so important to make sure that you report the proper individuals on your Form 990. If any possible issues arise, the individuals listed in Part VII were providing the oversight during the tax period.

Part VII requires an organization to list its officers, directors, trustee, key employees, and highest compensated employees. The IRS has a specific definition for each of these individuals. It is important to understand the requirements of each classification for correct reporting.

Director or Trustee. Directors or Trustees are all individuals that served on the board at any time during the tax year. These individuals may not be a board member as of the end of the tax year but if they served at any time during the year, they should be listed. Only those individuals with voting rights should be listed. Advisory board members, interns or other individuals that cannot vote, should not be included. It also does not matter if these individuals were paid or not.

Officer. An Officer is an elected or appointed person that manages the organization’s daily operations at any time during the tax year. Officers include board officers (chair, vice chair, secretary, and treasurer), as well as the top management official, normally with the Executive Director or CEO title. Regardless of title, this is the individual responsible for implementing the decisions of the governing board or for supervising the organization’s operations. The top financial official, normally with the CFO title, should also be listed. This is the person having ultimate responsibility for managing the organization’s finances. Depending on the size of the organization, the top management and top financial official may be the same individual.

Key Employee. A key employee is an employee of the organization, not considered an officer, director, or trustee, that satisfies three tests. (1) The employee receives more than $150,000 of reportable compensation from the organization and all related organizations during the tax year or calendar year. (2) The employee must either have responsibilities, powers, or influence over the organization similar to those of an officer, director or trustee; or manage a specific segment or activity of the organization that represents 10% or more of its entire activities, assets, income, or expenses; or have or share authority to control to determine 10% or more of the organization’s capital expenditures, operating budget, or employee compensation. (3) The employee is one of the organization’s 20 employees with the highest reportable compensation for the calendar year ending with or within the organization’s tax year.

Highly Compensated Employees. Employees who receive more than $100,000 of combined reportable compensation (from the organization and related organizations) and who are not current trustees, directors, officers, or key employees of the organization are considered highly compensated employees.

Former. A former Trustee, Director, Officer, or Key Employee is any person (1) the organization reported as such on any of its five prior Form 990s but did not serve in any of those positions at any time during the current tax year and (2) who received in the calendar year ending with or within the organization’s tax year reportable compensation from the organization an any related organization that exceeded $100,000 for a former Officer or Key Employee, or $10,000 for services as Director or Trustee. A former Highly Compensated Employee is an individual (1) that was not an employee during the calendar year ending with or within the organization’s tax year, (2) was reported as one of the five highly compensated employees on any of the organization’s five prior Form 990s, (3) who had reportable compensation that exceeded $100,000 for the calendar year ending with or within the organization’s tax year, and (4) that would be one of the organization’s highly compensated employees based on reportable compensation if they had been an employee during the calendar year ending with or within the organization’s tax year.

An organization may not have individuals to report in all of these categories, especially for smaller organizations or those that are operated entirely by volunteers. However, Indiana nonprofits should report at least a board chair, secretary, and treasurer, which are required by Indiana law.

Contributed by: Carrie Minnich, CPA, MAcct | Director | DWD CPAs & Advisors

Posted in Mission Minded Nonprofits

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