IRS 990 or 990-EZ - Schedule L Explained

What is IRS 990 or 990-EZ - Schedule L?

IRS 990 or 990-EZ - Schedule L is a financial document that certain organizations, particularly nonprofits and exempt entities, must submit to the Internal Revenue Service (IRS). This schedule focuses specifically on related party transactions. It serves as a supplementary return to the main IRS 990 or 990-EZ forms, allowing the IRS and the public to understand the financial relationships these organizations have with directors, officers, key employees, and other related individuals. Essentially, it's used to ensure transparency about dealings with affiliated parties.

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Purpose of IRS 990 or 990-EZ - Schedule L

The primary purpose of IRS 990 or 990-EZ - Schedule L is to provide transparency regarding transactions between an organization and its related parties. It exists to ensure compliance with tax laws and maintain public trust in nonprofit organizations. By using this form, organizations disclose potentially controversial financial interactions that could raise concerns about governance or tax compliance. This aids stakeholders—including donors, regulators, and the public—in evaluating financial practices and ensuring that funds are used appropriately.

Where is IRS 990 or 990-EZ - Schedule L used and by whom?

IRS 990 or 990-EZ - Schedule L is typically used by tax-exempt organizations, such as charities, educational institutions, and other nonprofits. It is especially relevant for:

1.

Organizations with significant transactions involving board members or key employees.
2.

Nonprofits seeking to maintain transparency and demonstrate accountability.
3.

Tax professionals preparing returns for clients in the nonprofit sector.

For example, a nonprofit that pays its executive director a consulting fee must report this transaction on Schedule L to avoid potential legal complications and to uphold ethical standards. Similarly, educational institutions that provide benefits to board members must disclose those benefits to encourage accountability.

Step-by-step: how to fill out IRS 990 or 990-EZ - Schedule L

Filling out IRS 990 or 990-EZ - Schedule L can be simplified by following these steps. Users can leverage pdfFiller’s online platform to complete the form efficiently.

1.

Start by downloading IRS Schedule L from the IRS website or access it directly on pdfFiller.
2.

Begin with the organization’s basic information, including the name, EIN, and tax year.
3.

Identify related parties, which include key employees, officers, and board members. Gather their names and positions.
4.

Document each related party transaction. Include amounts, dates, and descriptions for each transaction.
5.

Answer all questions related to the financial practices of the organization regarding these transactions accurately.
6.

Review the filled-out form for accuracy, utilizing pdfFiller's tools to check for errors.
7.

Submit the completed form along with the main IRS 990 or 990-EZ form.

Who is required to complete IRS 990 or 990-EZ - Schedule L?

Organizations that are required to complete IRS 990 or 990-EZ - Schedule L include:

1.

Troublesome transactions with board members or key employees at nonprofits.
2.

Tax-exempt organizations subjected to certain reporting thresholds.
3.

Organizations with gross receipts greater than $200,000 or total assets worth over $500,000 required to file Form 990.
4.

Smaller organizations that file Form 990-EZ if they have significant related party transactions.

In general, any nonprofit with substantial financial relations with its key individuals must report those to maintain compliance and transparency.

Information you need to complete IRS 990 or 990-EZ - Schedule L

To successfully complete IRS 990 or 990-EZ - Schedule L, you'll need the following information:

1.

Organization's name and Employer Identification Number (EIN).
2.

The tax period for which the form is being completed.
3.

Names and positions of related parties.
4.

Details of each transaction with related parties, including the amounts and dates.
5.

Nature of relationships between the organization and its related parties.

Having this data ready will streamline the process and ensure compliance with regulations.

How to submit IRS 990 or 990-EZ - Schedule L

After filling out IRS 990 or 990-EZ - Schedule L, it’s important to know how to submit it correctly. Organizations can submit this schedule through the following channels:

1.

Online submission via the IRS e-file system for organizations that qualify.
2.

Mailing a completed paper version to the IRS address specified in the form instructions.
3.

Utilizing third-party tax software, which may automate some processes for submission.

Always review the specific deadlines for submission. For most organizations, the form is due on the 15th day of the 5th month after the end of the tax year, with the possibility of extensions being available.

When to update or refile IRS 990 or 990-EZ - Schedule L

Organizations may need to update or refile IRS 990 or 990-EZ - Schedule L if:

1.

There are significant changes in related party transactions.
2.

Changes in the status or roles of key employees or board members occur.
3.

Incorrect information was submitted initially and needs correction.
4.

The organization undergoes a merger or acquisition affecting relationships with related parties.

Keeping this information current is essential for adhering to tax regulations and maintaining public trust.

What happens if you don’t file IRS 990 or 990-EZ - Schedule L?

Failing to file IRS 990 or 990-EZ - Schedule L can lead to serious repercussions, including:

1.

Penalties imposed by the IRS, which may accumulate over time.
2.

Loss of tax-exempt status for the organization, resulting in increased tax liabilities.
3.

Potential legal actions for failing to comply with reporting requirements.
4.

Damage to the organization’s reputation and trustworthiness among donors and the public.

It’s vital for organizations to stay compliant and ensure that all necessary documentation is submitted properly and on time.

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Frequently Asked Questions About the IRS 990 or 990-EZ - Schedule L

What is the purpose of the IRS 990 or 990-EZ - Schedule L?

The IRS 990 or 990-EZ - Schedule L is used by organizations to report certain transactions and relationships with interested persons. This schedule helps the IRS to evaluate whether the organization is complying with the laws governing these transactions. Organizations must accurately complete Schedule L to provide transparency on their financial activities and ensure adherence to tax obligations.

Who needs to file the IRS 990 or 990-EZ - Schedule L?

Organizations that engage in transactions with interested persons are required to file the IRS 990 or 990-EZ - Schedule L. This includes non-profits and other tax-exempt entities that have financial dealings with their officers, directors, and key employees. Filing Schedule L allows such organizations to disclose these crucial details, promoting transparency and compliance.

What types of transactions are reported on the IRS 990 or 990-EZ - Schedule L?

Schedule L requires reporting on several types of transactions, including loans, grants, and payment arrangements with interested persons. It also covers transactions involving the sale of products or services provided to the organization. Accurate reporting on these transactions helps maintain ethical practices and allows for better oversight by the IRS.

Where can I find the IRS 990 or 990-EZ - Schedule L form?

The IRS 990 or 990-EZ - Schedule L form can be found on the IRS official website under the forms and publications section. Additionally, platforms like pdfFiller provide access to editable versions of this schedule, allowing users to easily complete and manage their documents online. Utilizing these resources ensures you have the most current and accurate form at your fingertips.

What are the penalties for failing to file the IRS 990 or 990-EZ - Schedule L?

Failing to file the IRS 990 or 990-EZ - Schedule L can result in significant penalties, including financial fines and loss of tax-exempt status. The IRS considers compliance with these forms essential for maintaining transparency within non-profit organizations. Organizations are encouraged to complete and submit Schedule L accurately and on time to avoid these consequences.

How does the IRS 990 or 990-EZ - Schedule L impact an organization’s tax-exempt status?

The IRS 990 or 990-EZ - Schedule L plays a crucial role in determining an organization’s tax-exempt status. By disclosing financial relationships and transactions, Schedule L helps the IRS assess whether the organization is operating within the confines of tax regulations. A failure to accurately report on this schedule may lead to a review of the organization’s tax status.

What information is required to complete the IRS 990 or 990-EZ - Schedule L?

To complete the IRS 990 or 990-EZ - Schedule L, organizations must gather information regarding transactions with interested persons, including details about amounts, types of transactions, and relationships. This may involve identifying loans and compensation, as well as other financial dealings with decision-makers. Thorough documentation ensures compliance and supports the integrity of the filings.

Can I amend my IRS 990 or 990-EZ - Schedule L after submission?

Yes, organizations can amend their IRS 990 or 990-EZ - Schedule L after submission if they discover errors or need to update information. It is important to file an amended form as soon as discrepancies are identified to maintain compliance. Make sure to follow the correct procedures stipulated by the IRS for amending forms for the best outcome.

Is there a difference between the IRS 990 and 990-EZ – Schedule L?

Yes, the primary difference between the IRS 990 and 990-EZ – Schedule L is related to the size and types of organizations filing the forms. The 990 form is typically for larger organizations with greater revenue, while the 990-EZ is for smaller non-profits that meet specific criteria. Both provide essential disclosure, but the requirements may vary based on the organization's status.

How can pdfFiller assist with IRS 990 or 990-EZ - Schedule L filings?

pdfFiller can streamline the process for organizations completing their IRS 990 or 990-EZ - Schedule L filings by providing an easy-to-use platform for editing and managing documents. Users can access templates, fill in necessary information, and prepare their filings online. Additionally, the ability to save and eSign documents ensures a smooth and efficient filing process for non-profits.

Author:

by Iryna Marchuk

Lead Writer/Blogs Manager at airSlate

Disclaimer: This content is for informational purposes only. It is not legal or other professional advice. airSlate provides this material on an "as-is" basis and disclaims all representations, guarantees, or warranties, whether express, implied, or statutory, including but not limited to warranties of merchantability, fitness for a particular purpose, or accuracy.