In a previous post, I covered Part I of Schedule J. If you’re required to submit Schedule J, you fill out Part I for anyone listed in Part VII, Section A of the main Form 990 (“listed persons”). In Part II of the Schedule J, you only report a subset of listed persons, those who fall into 3 categories:
- Former officers, directors, trustees, key employees, and highest compensated employees
- Individuals whose reportable compensation and other compensation from your and any related organizations was greater than $150,000
- Anyone who received or accrued vacation from any unrelated organization or individual, for services rendered to your organization
Part II calls for more details about compensation. There are 2 lines for each person listed. On line (i), report compensation from your organization. Use line (ii) for compensation from related organizations. For individuals described in the third bullet point above, report their compensation as if it was paid by your organization, and list the name of the unrelated organization in Part III, where you report supplemental information.
In each column, report the compensation reported on the payee’s W-2 or 1099 for the calendar year ending during, or with, the fiscal year you’re reporting on your Form 990. When you’ve filled in all the subsets of column (B), the total for each employee should tie out to column (D) or (E) for that employee in Part VII, Section A of the main Form 990.
In column (C), report any deferred compensation paid to or accrued for the employee – qualified and unqualified retirement plans maintained by yours or a related organization, funded or unfunded, vested or subject to a substantial risk of forfeiture. Include the annual increase or decrease in actuarial value, but not the earnings or losses on deferred amounts in a defined contribution plan. If a piece of compensation is paid within 2 ½ months of the end of the calendar year you’re using for Schedule J, that’s considered current compensation, not deferred. If an individual is required to work for a certain period of time in order to be paid a piece of deferred compensation, treat that compensation as earned or accrued ratably over the period of work, even if it’s not funded and may be subject to a substantial risk of forfeiture until the end of the period of work.
Nontaxable benefits in column (D) refer to any benefits the IRS deems nontaxable. This would include things like health, life, and disability insurance, and certain types of assistance payments, such as for dependent card, adoption or tuition. It also includes some benefits you may not immediately think of, e.g. de minimis benefits, working condition benefits, no additional cost services, and reimbursements under an accountable reimbursement plan. De minimis benefits are those whose value, taking into account the frequency with which you provide similar benefits, is so small that accounting for it would be unreasonable or administratively impractical. Working condition benefits are those which, if the employee paid for it, it would be a deductible business expense, e.g. business use of an employer-provided automobile or business use of a cell phone provided to the employee primarily for business purposes. No additional cost benefits are services you offer for sale to customers and incur no additional cost in providing the service to employees.