Navigating 990-PF: A Step-by-Step Guide for Parts 5-8

Congratulations on successfully completing Parts 1-4 of your Form 990-PF! Not quite there yet? Be sure to read the first blog in our 990-PF series here.

Now, let’s dive into the next section, which covers Parts 5 to 8. 

We understand that this can seem overwhelming, but fear not – we’re here to help you navigate these sections step by step.

Part V: Excise Tax Based on Investment Income

Part V primarily involves calculations. Here’s a breakdown of the key lines:

  • Line 1a: Indicate if your Exempt operating foundation falls under section 4940(d)(2). If it doesn’t, leave this line blank. If it does, add the date of the ruling and attach a determination letter as proof.
  • Line 1b: Calculate 4% of the value reported in Part I, Line 12, column (b).
  • Line 2: Report Tax under section 511 (domestic section 4947(a)(1) trusts and taxable foundations only).
  • Line 3: The sum of lines 1b and 2.
  • Line 4: Report the Subtitle A (income) tax.
  • Line 5: The difference between lines 4 and 3. Report a zero value if the difference is less than zero.
  • Lines 6 and 7: Report categorized credits and payments and the total credits and payments.
  • Line 8: Applicable only if you have a penalty for underpayment of estimated tax. Provide the penalty amount.
  • Line 9: Report the total tax due, if any.
  • Line 10: Indicates the overpayment amount. If the total on line 7 is greater than the total on lines 5 and 8, report the overpayment.
  • Line 11: If you have an overpayment, specify how much you’d like credited toward the following year’s return and how much you’d like refunded.

Part VI: Statements Regarding Activities

Part VI helps determine if you need to file additional forms or schedules, such as Form 990-T, 1120-POL, or 4720, in addition to your 990-PF. Your responses guide you on the required actions. For example, if you answer ‘Yes’ to Part VI-A, Line 9, you need to complete Part XIII of the form. Pay attention to these details and answer responsibly.

Part VII: Information About Officers, Directors, Trustees, Foundation Managers, Highly Paid Employees, and Contractors

This section requires you to provide details about your organization’s key personnel and their compensation.

  • Line 1: List officers, directors, trustees, and foundation managers along with their compensation details. Report individual names, addresses, average hours per week devoted to the organization, compensation, or zero if not applicable, and contributions to employee benefit plans and deferred compensation, as well as expense accounts and other allowances.
  • Line 2: List the five highest-paid employees not included in line 1 if their compensation exceeds $50,000. If not, report ‘None.’
  • Line 3: Report the five highest-paid independent contractors hired for professional services who received $50,000 or more. If not, report ‘None.’

Part VIII: Summary of Direct Charitable Activities

In Part VIII-A, you’ll detail the four largest programs that directly supported your organization’s purpose during the tax year, along with associated expenses. Specific and accurate information is crucial to maintain your tax-exempt status.

Part VIII-B, for private foundations, requires you to report the two largest program-related investments and the amounts invested. Again, be detailed, and if you have nothing to report, enter ‘None.’

Take Form 990-PF One Step at a Time with Tax990!

Navigating the 990-PF may seem like a lot, but you can take it step by step, referring to the IRS Form 990-PF instructions for further clarification. And remember, Tax 990 is here to help – our reviewer and approver feature allows a second pair of eyes to confirm the accuracy of your return. We’ve got your back!

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