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11146: 990 - Note 036 & EF Message 5188

990 Tax Exempt

Fundraising entries on Schedule G are producing a Return Note and EF Message that I cannot resolve.

In your return, a total on Schedule G Part II, Fundraising Events (screen G2) has produced Return Note 036:

AMOUNTS ARE NOT EQUAL: The amount calculated for Schedule G, Part II, line 10, does not equal the amount calculated for Form 990, Part VIII, line 8b.

In certain instances, these amounts do not have to be equal. For instance, these amounts would not be equal if the organization is not required to report - and did not report - certain fundraising events on Schedule G.

The note tells you that the direct expense summary, line 10 of Schedule G Part II, Fundraising Events, may need to appear on Form 990 Part VIII as direct expenses on line 8b. We do not carry amounts from the Schedule G automatically because the IRS requires that only events that have gross receipts of more than $5,000 must be reported on the Schedule G. The total of all events, including events that generated less than $5,000 of gross receipts, are recorded on Part VIII, so Schedule G and Part VIII amounts may differ. To clarify, part VIII should always be completed for the fundraising events, but Schedule G is only completed in certain cases. You will need to determine under which column fundraising revenue and expenses should be reported. This note can be disregarded if you determine that the return is accurate without additional entries - it is just a suggestion to review the return to ensure that all amounts have been recorded as needed. 

To enter direct expenses on line 8b, and clear the note, on screen 8, enter that direct expense on line 8b, Direct Expenses, in either the Unrelated Business Revenue or Revenue Excluded from Tax column, as appropriate.

Entry is not available for line 8b under the Exempt Function Revenue column because IRC Sections 512, 513 and 514 only describe how to classify properly defined “fundraising” activities as “Unrelated Business Revenue” or “Revenue Excluded from Tax.” Generally, the primary purpose of fundraising events is to raise funds for the organization. These activities typically do not substantially accomplish the organization’s exempt purpose and thus, are not reported under the Exempt Function Revenue column.

This entry eliminates the note, however, it generates EF Message 5188:

AMOUNT MISMATCH: Form 990, page 12, Part XI, line 10, must equal Form 990, page 11, Part X, line 32, column (B). Review the amounts reported on the following:

* Part VIII, column (A), line 12 (screen 8)

* Part IX, column (A), line 25 (screen 9)

* Part X, line 32, column (A) (screen 10 and related schedules)

* Part XI, line 5 - 9 (screen 11)

Correct EF Message 5188 by entering the net income on the balance sheets where appropriate (screens 10A and 10B) so that Form 990, page 11, Part X, line 32, column (B) equals Form 990, page 12, Part XI, line 10. 

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