Good news – Schedule K-1 is optional for tax year 2011

When it comes to tax prep, easier is always welcome. On March 22nd, the IRS retracted the requirement for nonprofit organizations filing Form 990 and 990-EZ to use a Schedule K-1 for reporting interests in joint ventures and other partnerships. The initial draft instructions released January 21, 2012 had required the significant change to the use of Schedule K-1.

It is not yet clear whether the Schedule K-1 will be required in future tax years. Such a change may create reporting inconsistencies between the Form 990 and 990-EZ financial data and an organization’s books and records. For organizations that have numerous joint ventures and partnerships, the administrative burden may also increase significantly.

There are some changes to the Form 990 and 990-EZ that I’ll highlight for you in future posts.