25d ā¢ General discussion
šØ Top Compliance Mistakes That Put Your Tax-Exempt Status at Risk
Your tax-exempt status is one of your nonprofitās most valuable assets. But even well-run organizations can make simple compliance mistakes that put it in jeopardy.
Here are the most common risks ā and how to avoid them:
1ļøā£ Missing Annual IRS Filings
Failing to file Form 990, 990-EZ, or 990-N for three consecutive years results in automatic revocation.
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Avoid it: Track deadlines and work with experienced professionals.
2ļøā£ Inaccurate or Incomplete Form 990
Your Form 990 is a public document that donors, funders, and watchdog groups review. Errors can raise red flags.
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Avoid it: Include all required information and review carefully before filing.
3ļøā£ Improper Benefit to Insiders
Excess compensation, insider deals, or personal benefit can endanger your tax-exempt status.
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Avoid it: Maintain strong conflict-of-interest policies and document fair-market practices.
4ļøā£ Mishandled Unrelated Business Income (UBI)
Non-mission-related revenue may require UBIT reporting via Form 990-T.
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Avoid it: Track unrelated income and understand your reporting responsibilities.
5ļøā£ Weak Documentation
Missing records around finances, governance, or restricted funds puts your organization at risk.
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Avoid it: Keep organized records, board minutes, and grant tracking systems.
6ļøā£ Mission Drift
Your activities must align with the mission the IRS approved.
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Avoid it: Regularly review alignment and report major scope changes to the IRS.
ā Stay Compliant, Stay Credible
Strong systems and consistent oversight protect your status and your funding. A proactive approach today prevents major headaches tomorrow.
How Smith CPAs & Associates Can Help
We support nonprofits with:
ā Form 990 preparation
ā Internal control reviews
ā Grant & fund tracking
ā Outsourced accounting & CFO services
š
Book your FREE 30-minute discovery call today!
Drop a comment below or send us a DM to get started.
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šØ Top Compliance Mistakes That Put Your Tax-Exempt Status at Risk
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