Creating and establishing your nonprofit requires a lot of work for you and everyone involved. The last thing you want to do is for the IRS to revoke your nonprofit status because you are out of compliance in one area or the other. Fortunately, there are a few steps you can take to ensure you maintain your good standing with the IRS and everyone else.
Why Nonprofit Compliance Is Important
Nonprofit compliance laws protect the donating public and ensure nonprofits do not exploit this status's financial advantages. Being exempt from state and federal taxation and beneficial funding place you as a nonprofit under close scrutiny.
Following these compliance laws ensures you stay in good standing with the general public and government agencies. Your compliance is essential to the success and effectiveness of your nonprofit organization.
Steps You Need To Take To Remain In Charity Compliance
You need to take numerous steps to ensure your nonprofit remains in compliance. Some of these are federal guidelines, while your state may require others. Here are a few.
Keep good records
There is nothing more important than a sound record-keeping system for a nonprofit organization. Your records should include documented sources of your donations, receipts, and expenditures that you will eventually reflect on your IRS Form 990.
Written records are essential, and an electronic system is invaluable. Gone are the days of throwing receipts in a cardboard box and organizing them later. Your records establish your continued qualification for tax exemptions and allow you to complete your tax filings accurately.
Submit appropriate tax forms
Although you are tax-exempt, you may not be exempt from filing the required tax forms. Many organizations are required to file one of the forms in the IRS 990 series.
You may be exempt if you are a small nonprofit with receipts under a certain threshold, a church, or a church-affiliated organization. Before you assume your exemption, check with a tax professional.
Review your state's nonprofit requirements annually
These vary from state to state, but you need to review your state's requirements and ensure that any required documentation is submitted on time. Some of these forms may include the following:
- Annual filing forms with the Secretary of State
- Applications for your license to fundraise
- State business license renewal
- State-level tax exemption forms
It is crucial to know your specific state requirements. You must complete these forms annually in some states, while in others, you do not.
Contact a local nonprofit compliance service to learn more.