Form 990 Series: Why Are Those Compensation Numbers Different? (Part 2 of 3)

If you have had the pleasure of delving into the Form 990, this is probably a question you have asked. Compensation and benefits have to be listed for each of the players*involved in an organization in Part VII (Page 7) of the core Form 990.  But then there is also compensation listed (in total) for the officers, directors and key employees only on the functional expense statement in Part IX (Page 10). Why are these totals different? They appear to be asking for the same information, right? Unfortunately, the IRS did not make it that easy on us. (And let’s be honest – did we expect anything else?) Here are the most common reasons why the information in Part VII (“Player Listing”) would NOT be the same as the information in Part IX (“Expense Statement”). 

1. Only the current officers, directors and key employees are included the Expense Statement – no highest compensated employees or former officers, directors or key employees.  
2. If the organization is a fiscal year-end filer (meaning their yearend is anything but 12/31), then the compensation and benefit information listed on the Player Listing will match their W-2 or the information based on the calendar year ending with the organization’s fiscal year (i.e., if the organization filed a tax return for their year ended June 30, 2013, the 2012 W-2 information would be included on the Player Listing). The compensation information on the Expense Statement (on line 5) is on whatever basis the organization’s financial statements are on (meaning fiscal year information). Line 5 also includes compensation and benefits in one lump sum as opposed to it being broken out amongst the categories.

If you’ve made it all the way through the core Form 990 and have now stumbled upon Schedule J without falling asleep, you have now reached the final place where compensation information may appear in the 990.  Schedule J is for the compensation Information for certain officers, directors, trustees, key employees and highest compensation employees.  Part I is the question-and- answer portion of the quiz which includes the types of “above and beyond” benefits individuals may be receiving and how compensation is determined by the organization’s governing body. Part II is the juicy stuff. This section contains the calendar year information (from the Player Listing) in even more detail than back on Page 7. Here the reader can see the individual components of the total compensation reported in Part VII: base compensation, bonus amount, other compensation, retirement plan contributions, deferred compensation and other nontaxable benefits. The totals in column E will tie back to the totals for each individual in the Player Listing. (We can rest easy tonight – something ties!)

* The “players” of the organization include officers, directors, trustees, key employees and highest compensation employees. Some additional explanation on some of the more ambiguous titles is discussed in a previous post  in this Form 990 Series.