Compensation Reporting and Documentation

Compensation, reported on Part VII and Schedule J, is based on the calendar year on Form W-2, even for fiscal-year nonprofits. (For the fiscal-year nonprofits, use the W-2 that falls within the fiscal year -- i.e., if your fiscal year is 6/30/09, you will report the W-2 compensation from 12/31/08). Since we are approaching the time of the year when all W-2 forms will be produced, it is a good time to start gathering the required information.

Compensation reporting
Compensation must be reported for the following groups: 

• Officers, directors, and trustees - no compensation limit for reporting
• Key employees - those with more than $150,000* in compensation
• Five highest paid, other than officers, directors, trustees, and key employees - if compensation is more than $100,000*
• Former officers, directors, trustees' and key employees - if compensation is more than $100,000 (from the organization and related organizations) 
• Former directors and trustees, paid more than $10,000* in their capacity as a former director or trustee 

Note that the top management official and top financial official are treated as officers no matter what their title is, so they must be listed.

You will need to familiarize yourself with the definition of "key employee." You should also familiarize yourself with Schedule J, as it requires a more detailed breakdown of compensation.

Compensation process documentation
Part VI of the Form 990 requires you to describe the process for determining compensation of the organization's key people (Q 15).
 
Schedule J includes additional questions regarding the compensation determination process.  If you do not already have a process in place, we encourage you to consider developing one, as this is a key area of interest for the IRS.
 
The IRS is also interested in any written policies on payment of perks, particularly those listed on Schedule J - including reimbursement and substantiation requirements.

Should you require assistance with any of these processes, contact your SS&G representative.