Staying in Compliance with the Non-Profit Status

There are certain rules and regulations a non-profit organization must adhere to in order to maintain its non-profit status. The IRS has the power to give or take away this status. It is essential to have a detailed awareness of the non-profit laws to ensure the organization is abiding by government standards.

Learn what the IRS and state officials specifically require. Refer to the Financial Accounting Standards Board (FASB) for how to prepare, present and report financial information. The IRS and state government recommend adherence to these specific rules. If these are neglected, the non-profit status may not remain active. This means the federal tax-free status could be revoked. In addition, it is vital the organization maintains good standing in the community by stewarding its donations well.

Four Components for Maintaining the Non-Profit Status

  1. Register with the proper state authority: How an organization registers varies from state to state. It may be required to register with the secretary of state’s office, state department of revenue, and/or state attorney general’s office. Some states offer a similar tax-free status to the IRS by offering an exemption from paying sales tax, for example.
  2. Account for non-profit activities: Present the nonprofit organization’s financial activities in accordance with the GAAP standards.
  3. Have a yearly audit: Hire a CPA to perform a yearly audit of financial statements. The CPA is qualified to view the financial statements and verify they are in compliance with GAAP.
  4. Follow IRS statutes: File an annual report to the IRS about the non-profit’s activities. Use tax-free form 990-Return of Organization Exempt From Income Tax. If the organization neglects to file its annual return 3 years in a row, the non-profit status may be revoked.