Oh, no, it's the "c word" that sometimes makes us shake in our nonprofit shoes. It's compliant and a very important part of your nonprofit status. While a 501(c) nonprofit receives key financial benefits, the penalties for failing to meet government requirements can be serious. Here's the definition: "A nonprofit organization is a business that has been granted tax-exempt status by the Internal Revenue Service (IRS) because it furthers a social cause and provides a public benefit." Here are some tips to stay compliant.
Bylaws Matter: Bylaws are written so you will act according to the standards set by your organization. If your nonprofit strays from them, you could be going against the law and your board of directors, officers, and others within the organization could be sued.
Hold Board Meetings: All nonprofit organizations should hold regular board meetings. Monthly meetings or what is defined in your bylaws are necessary to keep your board up to date on your activities and financial health. It is advised to have the secretary take minutes for future review if needed.
Clear Record-keeping: A nonprofit should practice keeping records up to date in order to file annual IRS returns as well as have available in the event the organization is accused of acting inappropriately. This includes all money coming in or out like fundraising events, grants, and all daily expenses. Keep receipts and documents of everything.
Keep Board Members Volunteers: To prevent conflict of interest, never pay an officer or board member as they are volunteers. If they are paid, ask them to excuse the meeting during a vote regarding their compensation.
File a Timely IRS Form 990: A 990 is a federal tax document for tax-exempt nonprofits have to file annually with the IRS. It is a form that records information about your organization's finances, programs, and mission statement. If you fail to submit a 990, you could be fined or even lose your 501c3 status.
Maintain State Tax Exemption: State tax exemption is totally different than your federal exemption so make sure you are aware of your state's requirements and application process to stay compliant.
Hire Experts and Ask for Professional Advice: Your nonprofit organization should be treated like a business. It is recommended to hire experts in different fields like accounting and law to assist you in remaining compliant. They are knowledgeable in their fields, can update you on policy changes, and provide you with expert advice when needed.
Fundraising Licenses: Most states have special regulations regarding fundraising, auctions, and gambling type activities. You may need to apply for more than one license for your activities. For example, a license is different for playing Bingo than holding a silent auction.
For more information, or if you would like us to handle all the compliance issues, please reach out; We’d love to help your nonprofit stay compliant year after year!