What Non-profits Need to Know about Tax Compliance

Here’s something you may not know about us… we love working with non-profits. (We can’t deny it!) We love helping organizations that are making a difference and guiding them to stay compliant with complex nonprofit tax compliance regulations.

So… when it comes to non-profit tax compliance, we’re right there with you. We’ve worked with a number of non-profits who have been exactly where you are right now. We understand the challenges you face, and we’re passionate about helping you succeed.

That means that we’re here to make sure your non-profit stays tax-exempt, files correctly, and is equipped to handle any IRS inquiries with confidence.

Dive into non-profit tax compliance with us – the water’s fine!

Understanding Your Tax-Exempt Status

Maintaining your tax-exempt status is crucial, but it’s not as simple as receiving your IRS determination letter and moving on. In reality, securing your tax-exempt status is just the beginning. 

The IRS expects non-profits to adhere to specific rules and regulations, and you must file the necessary forms each year to stay compliant.

One of the most important forms is the Form 990, which provides transparency about your organization’s activities, governance, and finances. Failure to file Form 990 for three consecutive years leads to automatic revocation of your tax-exempt status—an outcome no non-profit wants to face. This can cause serious disruptions, and regaining that status can be a lengthy and costly process.

We know the ins and outs of this process. We’ve helped non-profits not only file their annual Form 990s but also understand how their financial decisions and governance impact their tax standing. And we go beyond filing—we offer strategic advice to ensure your organization is aligned with IRS requirements and ready to handle any potential inquiries with ease.

Maintaining your tax-exempt status can feel really overwhelming, but it’s an important part of ensuring your organization’s long-term sustainability and reputation. Many non-profits find themselves unprepared and unaware of the filing deadlines, leading to the loss of their status. Unfortunately, regaining tax-exempt status can be an uphill battle, with many organizations facing significant delays and financial hurdles due to a lack of education and preparation.

Unrelated Business Income (UBI)

If your non-profit engages in activities that aren’t directly related to its mission, such as selling products or services, it may generate unrelated business income (UBI). This income is taxable and must be reported on Form 990-T. 

Many non-profits fall into the trap of assuming all revenue is tax-exempt, but UBI can trigger tax liabilities, even for organizations that are otherwise tax-exempt.

If you want help in determining what qualifies as UBI and how to correctly report it, we can work with you to develop strategies that keep your non-profit’s mission at the forefront while minimizing any tax exposure from unrelated activities.

Navigating State Compliance

We have a few tips for you to stay compliant so you’re always on top of your non-profit’s tax obligations and can focus on making the impact you’re passionate about.

Our first tip is to understand your state’s specific tax requirements, as they can vary significantly. From registering with your state’s charitable bureau to managing sales tax on fundraising events, staying informed is key to avoiding surprises.

Next, make sure you’re tracking deadlines closely. Each state may have its own deadlines for filings and renewals, so staying organized is crucial. Keeping a detailed calendar of tax obligations can save you from last-minute scrambles.

Also, don’t forget about sales tax on fundraising events—many non-profits overlook this. Even if your organization is tax-exempt, you may still be required to collect and remit sales tax for certain fundraising activities. Clarifying this ahead of time can prevent any compliance issues.

Lastly, always review your tax-exempt status annually. Ensuring that all filings, including Form 990, are up to date will help maintain your standing and prevent revocation. Staying proactive will ensure your non-profit is always prepared and compliant with nonprofit tax compliance.

The Importance of Proper Documentation for Nonprofit Tax Compliance

The IRS requires non-profits to keep thorough records of their finances, donations, and expenditures. This includes tracking receipts for contributions, grants, and expenses related to your charitable work. Strong documentation isn’t just good bookkeeping—it’s essential for your tax compliance and overall transparency.

We work closely with non-profits to establish and maintain financial documentation systems to ensure that you’re ready for any IRS inquiries.

Keeping Up with Changing Regulations

Non-profit tax laws and regulations are constantly evolving. What worked for your organization last year might need to be updated or changed for the current year.

As your trusted CPA partner, we stay ahead of the curve so you don’t have to. We make it our priority to understand the latest tax law updates and how they affect non-profits. When changes happen, we’ll guide you through what it means for your organization and help you adjust accordingly.

Our goal is to take the burden of tax compliance off your shoulders, so you can focus on what matters most: your mission.