990 schedule m instructions
Schedule M (Form 990) Overview
Schedule M details noncash contributions for nonprofits filing Form 990, exceeding $25,000 in aggregate gifts; it’s crucial for accurate financial reporting and compliance.
Purpose of Schedule M
Schedule M (Form 990) serves a vital role in providing transparency regarding a nonprofit organization’s noncash contributions. Specifically, it’s utilized by organizations that have filed Form 990 to meticulously report the various types of noncash donations received throughout the tax year. This includes detailed information about these contributions, ensuring a clear record for both the organization and the Internal Revenue Service (IRS).
The schedule isn’t simply a listing; it demands specific details concerning the quantity of each contribution and, critically, how the organization determined the value assigned to each item. This valuation process is paramount, as it directly impacts the organization’s financial statements and tax liabilities. Accurate reporting on Schedule M demonstrates responsible financial stewardship and adherence to IRS regulations, fostering public trust and accountability.
Who Must File Schedule M
Schedule M (Form 990) isn’t a universal requirement for all nonprofits. Filing hinges on a specific threshold: organizations are obligated to complete and attach Schedule M to their Form 990 if they received aggregate noncash contributions totaling more than $25,000 during the tax year. This threshold triggers the reporting requirement, ensuring that larger volumes of noncash donations receive appropriate scrutiny.
Specifically, if an organization reports amounts on either Form 990, Part IV, line 29 or line 30, they must file Schedule M. These lines on Form 990 relate to noncash contributions, making it a direct link to the Schedule M filing obligation. Failing to file when required can lead to penalties, so understanding this threshold is crucial for maintaining compliance with IRS regulations.
Part I: Reporting Noncash Contributions
Part I of Schedule M focuses on detailing all noncash contributions received, including types and quantities, providing a comprehensive overview of donated assets.
Total Noncash Contributions
Determining the total noncash contributions is a critical first step in completing Schedule M. Organizations must aggregate the value of all noncash donations received during the tax year. This includes items like artwork, historical treasures, vehicles, securities, and other donated property. If the aggregate value exceeds $25,000, filing Schedule M becomes mandatory. Accurate calculation is essential, as it triggers the reporting requirement and impacts subsequent sections of the form.
Organizations should meticulously track each donation, documenting its description and fair market value. This total directly influences whether Schedule M needs to be attached to Form 990, ensuring compliance with IRS regulations. Proper record-keeping simplifies the process and supports the reported figures during potential audits. The total value is a key indicator of an organization’s reliance on noncash support.
Threshold for Filing
The threshold for filing Schedule M (Form 990) is directly tied to the aggregate value of noncash contributions received during a tax year. Specifically, an organization is required to file this schedule if it receives more than $25,000 worth of noncash donations. This threshold applies to the total value of all such contributions, regardless of the type of property donated.
Organizations must carefully assess their noncash contributions to determine if they surpass this limit. Failing to file when required can result in penalties. Conversely, if the total value remains at or below $25,000, Schedule M is not necessary. This threshold ensures that only organizations with significant noncash support are subject to the detailed reporting requirements outlined in the schedule, streamlining the filing process for smaller organizations.
Types of Property Reported
Schedule M requires reporting a diverse range of noncash property contributions. This includes tangible personal property like artwork, historical treasures, and items such as books and publications. Furthermore, donations of vehicles – encompassing cars, boats, and planes – must be detailed.
The schedule also covers various types of securities. Specifically, organizations must report both publicly traded securities and miscellaneous securities received as gifts. It’s important to note that donations of services, or the use of facilities and equipment, are not reported on Schedule M. The IRS provides specific guidance on categorizing these contributions, ensuring accurate and consistent reporting across all nonprofit organizations.
Artwork (Works of Art)
Schedule M requires detailed reporting of artwork donations, encompassing paintings, sculptures, and other artistic creations. Organizations must meticulously document these contributions, including a description of each piece and its estimated fair market value. Proper valuation is critical; typically, this involves a qualified appraisal.
The IRS emphasizes that the reported value should reflect what a willing buyer would pay a willing seller in an arm’s-length transaction. Detailed records supporting the valuation, such as the appraiser’s report, must be retained and available for IRS review. Failure to adequately document artwork donations can lead to penalties and disallowed deductions. Accurate reporting ensures transparency and accountability in nonprofit financial practices.
Historical Treasures
Schedule M demands specific attention to “historical treasures,” which include rare manuscripts, antique furniture, and other items of significant historical or cultural value. These donations require particularly rigorous valuation due to their unique nature and often limited comparable sales data. A qualified appraiser specializing in the relevant historical field is essential.
The appraisal must detail the item’s provenance, condition, and historical significance to justify the assigned fair market value. Organizations should retain all supporting documentation, including the appraiser’s credentials and a comprehensive description of the methodology used. The IRS scrutinizes these valuations closely, so thoroughness is paramount. Accurate reporting of historical treasures demonstrates responsible stewardship of cultural assets.
Fractional Interests
Schedule M requires detailed reporting of fractional interests in tangible property, such as partial ownership of artwork, real estate, or other assets. Valuing these contributions can be complex, as it necessitates determining the proportionate share of the total fair market value. A qualified appraiser must assess the entire asset’s value before calculating the fractional interest’s worth.
Organizations must clearly document the basis for the valuation, including the methodology used to determine the overall asset value and the rationale for allocating a specific percentage to the donation. The donor’s acquisition cost and any subsequent improvements should also be considered. Proper documentation is crucial to substantiate the claimed deduction and avoid potential IRS scrutiny.
Books and Publications
Schedule M necessitates reporting donated books and publications, but generally excludes those made available for public use. Valuation hinges on established retail prices if readily available; otherwise, a reasonable estimate of fair market value is required. Organizations should document how the value was determined, especially for rare or collectible editions.
For large donations of books, a summary listing detailing quantity, title, and estimated value is acceptable. However, individual valuations are necessary for exceptionally valuable items. Donated library materials, even if substantial in quantity, are typically reported at nominal value unless they possess unique historical or collectible significance. Accurate record-keeping is vital for substantiating these contributions.
Vehicles (Cars, Boats, Planes)
Schedule M requires detailed reporting of donated vehicles – cars, boats, and planes – including make, model, and vehicle identification number (VIN). Valuation is critical; generally, the fair market value is determined using sources like Kelley Blue Book or similar guides, reflecting the condition at the donation date. For vehicles sold shortly after donation, the sale price serves as strong evidence of value.
If the vehicle is used by the organization, a reasonable estimate of its contribution to the organization’s mission is necessary. Documentation supporting the valuation method is essential. Special rules apply to donations exceeding $500, potentially requiring a qualified appraisal. Accurate reporting ensures compliance and avoids potential scrutiny from the IRS.
Publicly Traded Securities
Schedule M demands precise reporting of publicly traded securities – stocks, bonds, and mutual funds – received as donations. Valuation relies on established market prices at the date of contribution; typically, the closing price on a recognized exchange is used. Documentation, such as brokerage statements, is vital to substantiate the reported value. The organization must clearly identify the type and quantity of each security donated.
For donations of multiple securities, a summary listing is acceptable, provided it includes sufficient detail for IRS review. If securities are sold quickly after donation, the sale proceeds offer compelling evidence of fair market value. Accurate reporting of these assets is crucial for maintaining transparency and fulfilling compliance requirements.
Miscellaneous Securities
Schedule M requires detailed reporting of “miscellaneous securities,” encompassing investments beyond publicly traded stocks and bonds – think limited partnerships, private equity, and other less common investment vehicles. Valuation presents a greater challenge here, often necessitating qualified appraisals from accredited professionals to determine fair market value. Unlike publicly traded assets, readily available market prices are usually absent.
Organizations must meticulously document the appraisal process, including the appraiser’s qualifications and the methodology employed. The IRS scrutinizes these valuations closely. Reporting should include a clear description of the security, the date of contribution, and the appraised value. Proper documentation is paramount to avoid potential penalties and ensure compliance with IRS regulations.
Part II: Contributions, Gifts, Grants, and Similar Amounts Received
Part II focuses on detailing each noncash contribution’s description, quantity, and how its value was determined, ensuring transparency and accurate financial reporting.
Description of Contributions
Schedule M’s Part II requires a thorough description of each noncash contribution received by the organization. This isn’t simply a categorization, but a detailed explanation of what was donated. For instance, instead of just stating “artwork,” the description should specify the artist, title, medium, and dimensions of the piece. Similarly, for historical treasures, provide details about the item’s significance and provenance.
For fractional interests, clearly outline the nature of the interest and the underlying asset. Books and publications require details like title, author, and edition. Vehicle descriptions must include make, model, and year. When reporting securities, specify the type (publicly traded or miscellaneous) and quantity. The goal is to provide enough information for anyone reviewing the form to understand precisely what the organization received, aiding in proper valuation and transparency.
Quantity of Contributions
Alongside detailed descriptions, Schedule M, Part II, demands a precise accounting of the quantity of each type of noncash contribution. This isn’t always a simple numerical count. For artwork or historical treasures, the quantity is typically ‘1’ per item, but accurate record-keeping is vital. Fractional interests require specifying the percentage or share received.
For books and publications, report the number of copies donated. Vehicle quantities are straightforward, but securities require reporting the number of shares or units. It’s crucial to maintain consistency between the description and quantity fields. Accurate quantity reporting is fundamental for calculating the total value of noncash contributions and ensuring compliance with IRS regulations. This data supports the organization’s financial transparency and accountability.
Method Used to Determine Value
Schedule M requires nonprofits to clearly state how they determined the fair market value of noncash contributions. The most common method is an appraisal, performed by a qualified appraiser following IRS guidelines. Organizations must indicate if an appraisal was used and, if so, provide details.
However, other valuation methods are permissible for certain items. For publicly traded securities, the value is generally based on the closing market price on the date of contribution. For other securities, or when appraisals aren’t available, organizations may use reasonable methods, documenting their rationale. Consistent and well-documented valuation methods are essential for substantiating the reported values to the IRS and demonstrating due diligence.
Appraisal Method
When utilizing the appraisal method for noncash contributions exceeding specific thresholds, the appraisal must adhere to IRS regulations. A qualified appraiser – possessing expertise in the donated property – must perform the valuation. The appraisal report needs to include a detailed description of the property, the valuation date, and the methods used to determine fair market value.
Organizations must retain a copy of the appraisal report for their records and be prepared to provide it to the IRS upon request. The appraisal should follow established appraisal standards and demonstrate a reasoned analysis. Proper documentation of the appraisal process is critical for substantiating the claimed charitable deduction and avoiding potential penalties.
Other Valuation Methods
For noncash contributions where an appraisal isn’t required, organizations can employ alternative valuation methods. These include using comparable sales data, price lists, or established market values for similar items. For publicly traded securities, the fair market value is generally determined by the closing price on the date of contribution.
Documenting the valuation method is crucial, even without a formal appraisal. Organizations should maintain records demonstrating how the value was determined, such as screenshots of price lists or details of comparable sales. Consistency and reasonableness are key; the chosen method should accurately reflect the property’s fair market value and be supported by available evidence.
Valuation of Noncash Contributions
Determining fair market value is essential for Schedule M, requiring proper documentation to support valuations and ensure compliance with IRS regulations.
Fair Market Value
Fair market value (FMV) represents the price an asset would sell for on the open market between a willing buyer and a willing seller, both having reasonable knowledge of relevant facts. For Schedule M reporting, establishing FMV is critical for noncash contributions like artwork, historical treasures, or securities. The IRS emphasizes using appropriate valuation methods, often requiring a qualified appraisal for items exceeding certain thresholds.
Generally, FMV is the gross sales price, but if an item isn’t readily saleable, estimation is necessary. Documentation supporting the FMV is paramount; this includes appraisal reports, comparable sales data, or other verifiable evidence. Organizations must exercise due diligence in determining FMV to avoid potential penalties and ensure accurate financial reporting on Form 990. Accurate valuation demonstrates responsible stewardship of donated assets.
Documentation Requirements
Comprehensive documentation is essential when reporting noncash contributions on Schedule M. For contributions exceeding $5,000, a qualified appraisal is generally required, adhering to IRS guidelines for appraiser qualifications and report content. This appraisal must include a detailed description of the property, the valuation date, and the methods used to determine fair market value.
For contributions valued at $500 or more, a contemporaneous written acknowledgment from the donor is necessary, specifying the property donated, the valuation date, and whether the donor received any goods or services in return. Maintaining detailed records, including donation receipts, appraisal summaries, and donor acknowledgments, is crucial during an IRS audit. Proper documentation substantiates the reported values and demonstrates organizational compliance.
Resources and Where to Find More Information
Access detailed guidance and the latest updates regarding Schedule M at the official IRS website (www.irs.gov/Form990), OMB No. 1545-0047, for complete instructions.
IRS Website (www.irs.gov/Form990)
The IRS website (www.irs.gov/Form990) serves as the primary resource for all things related to Form 990 and its schedules, including Schedule M. Here, you’ll find the official instructions, which provide a comprehensive guide to completing each section of the form accurately. These instructions detail reporting requirements for noncash contributions, outlining specific types of property and valuation methods.
Furthermore, the website offers frequently asked questions (FAQs) addressing common issues and clarifications regarding Schedule M. You can download the current version of the form and related worksheets directly from the site. The IRS also provides links to relevant publications and other resources that can assist organizations in understanding their filing obligations. Regularly checking this website ensures you have the most up-to-date information and guidance for compliant filing.
OMB No. 1545-0047
OMB No. 1545-0047 is the Office of Management and Budget control number assigned to Form 990 and its associated schedules, including Schedule M. This number is crucial for the IRS’s tracking and management of information collection. It signifies that the form has undergone review and approval by the OMB, ensuring it aligns with federal regulations and minimizes burden on taxpayers.
Organizations filing Schedule M must include this OMB number on their submission. It’s a standard requirement for all government forms, confirming the legitimacy and proper authorization of the data being reported. The presence of this number assures the IRS that the form is current and compliant with established guidelines. It also allows for efficient processing and analysis of the collected information, contributing to effective oversight of nonprofit organizations.
