Nonprofits are vital to building stronger communities and solving pressing societal issues, but staying in federal compliance can often feel like navigating a maze. With strict IRS regulations and deadlines, even the most well-meaning organizations can find themselves at risk of penalties or losing their tax-exempt status. Fortunately, these challenges can be overcome with the right tools, strategies, and foresight.
Let’s explore three common compliance challenges nonprofits face—and how your organization can stay ahead of them.
Timely Filing of IRS Forms
One of the most critical compliance tasks for nonprofits is filing annual tax forms with the IRS. Depending on your organization’s size and revenue, you’ll need to submit one of the following:
- Form 990-N: For organizations with gross receipts of $50,000 or less.
- Form 990-EZ: For organizations with gross receipts between $50,001 and $200,000 and total assets under $500,000.
- Form 990: For organizations with gross receipts over $200,000 or total assets above $500,000.
- Form 990PF: Specifically for private foundations, regardless of their financial size or revenue. Private foundations differ from public charities in that they typically have a single primary source of funding (such as an individual, family, or corporation) and are often subject to different tax rules.
Failing to file any of these forms by the deadline—even inadvertently—can result in penalties. Missing filings for three consecutive years leads to automatic revocation of your tax-exempt status, requiring a lengthy and costly reinstatement process.
How to Solve It: The key to staying compliant with IRS deadlines is planning ahead. Use a compliance calendar to track deadlines, and assign someone in your organization to manage these filings. If your team struggles to keep up, consider outsourcing to experts who specialize in nonprofit compliance. This way, you’ll always stay on top of deadlines and avoid the stress of last-minute filings.
Understanding Complex Regulations
IRS regulations for 501(c)(3) organizations are notoriously complex and vary depending on your activities. For example, there are strict limits on political campaigning and lobbying, and any income from unrelated business activities (UBI) could lead to taxable obligations. Additionally, nonprofits must provide proper documentation for all donations, issue receipts to donors, and ensure that their reporting reflects these transactions accurately.
For many nonprofits, especially those with limited resources or smaller teams, understanding and interpreting these requirements can be overwhelming.
How to Solve It: Education is your best ally here. Take the time to understand the IRS regulations that apply to your organization. Webinars, workshops, and resources tailored for nonprofits can help your staff stay informed. You can also lean on consultants or legal experts who specialize in nonprofit compliance to guide you through complex issues like UBI reporting or lobbying limits. This proactive approach ensures you won’t stumble into unintentional violations.
Multi-State Compliance
If your nonprofit raises funds in multiple states, you’re likely familiar with the added complexity of state charitable solicitation laws. Each state has its own rules, deadlines, and requirements for registration and reporting. Missing a renewal or registration deadline in just one state can lead to fines, revoked fundraising rights, or unnecessary administrative hurdles.
How to Solve It: Simplify the process by consolidating your compliance efforts. Start by creating a centralized system to track filing deadlines in each state where you operate. Additionally, you can use online platforms or software designed to streamline multi-state registration and reporting. By organizing your compliance management process, your nonprofit can stay compliant without sacrificing valuable time and resources.
Overcoming Compliance Challenges Together
Maintaining federal compliance may seem daunting, but it’s essential to ensure your organization’s ability to serve its mission. By tackling these challenges head-on—whether through better planning, investing in education, or using compliance management tools—your nonprofit can avoid penalties, maintain its tax-exempt status, and stay focused on what matters most: making a difference in your community.
If your nonprofit feels overwhelmed by compliance requirements, you don’t have to go it alone. BryteBridge Nonprofit Solutions provides expert support tailored to your organization’s needs, helping you navigate IRS filings, state registrations, and everything in between.
Take control of your compliance today! For more information, join BryteBridge Connect Membership for Live Bootcamps, Webinars, and classes. Speak to a BryteBridge Consultant today by calling 877-857-9002.
