James E Raftery, CPA
James E. Raftery, CPA, PC
NonProfit Schedule G Explained

IRS reporting is making your nonprofit look bad. Here's why.

By Kristina Morgan

Recently, one of our non-profit clients was asked by a reporter, "Your tax forms show you lose money holding special events. Why don't you help people instead of wasting money?" The reporter had a point. Special Events are specifically designed and laboriously planned to produce revenue for the organization, right? Unfortunately, this misunderstanding is better at stirring up controversy than realizing what the IRS requires in reporting.

Schedule G on the form 990 reports upon activity related to fund raising. When a special event occurs (such as a $50-a-plate dinner), the lines associated with direct expense can look like this example:


It looks like this imaginary charity lost money by holding the event, doesn't it? The truth is simple. The IRS requires that contributions be shown separately and not included in the net income calculation of the special event, and the schedule G is specifically for that.

In this example, the charity collected $10,000.00 (line 1) at the event. You may ask, "But if they collected $10,000.00, why does it say contributions were only $6,000.00?" The $4,000.00 difference is the Fair Market Value (FMV) of what the attendees received in return for their contribution. The meal in this scenario had a FMV of $20.00; with 200 people, that set the gross income lower only for the purposes of schedule G. The IRS wants it this way, so that's how we give it to them.

Being experts in the needs and requirements for non-profits, we already knew this, but it's not common knowledge. It's important for management of an organization to understand how the Schedule G works to explain it to their trustees, the public, and every now and then, a curious reporter. You can invite them to read it for themselves by clicking here: IRS Instructions for Schedule G (Form 990 and 990EZ).

If you have any questions about this topic or any others relating to your finances, give us a call or send us message to the email shown below.





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