Losing your tax-exempt status without warning? 🫣

Hi,

Most nonprofit boards assume the IRS will warn them before anything serious happens. It usually doesn’t.

The most common way a nonprofit loses its tax-exempt status is quiet and automatic. Miss the Form 990 three years in a row and your exemption is revoked, with no notice and no hearing. Donations stop being deductible, grant eligibility disappears, and getting reinstated means fees, back filings, and months of work.

And the 990 is only the part everyone can see. It is a public document – donors, grantmakers, watchdog sites, and reporters all read it. When the numbers look off or the story does not add up, funding is the first thing to go.

The danger rarely arrives as one big event. It piles up quietly:

• A 990 filed late, filed wrong, or not filed at all
• Restricted grants and donations that can’t be traced to how they were actually spent
• Program, admin, and fundraising expenses split with no documented method
• Revenue from activities unrelated to your mission that may owe tax (UBIT)
• Fundraising in states where you never registered to solicit

Any one of these can become a failed grant review with clawed-back funds, a board held personally responsible for mismanaged money, or a surprise tax bill nobody flagged. Most of it is preventable with a few basic habits: file the right 990 on time every year, track restricted funds separately from the day they arrive, document how you allocate shared costs, keep a real reserve policy, and give every donor of $250 or more a proper written acknowledgment so their deduction holds up.

That is why it helps to have all of it handled by one team: 

• Form 990, 990-EZ, 990-N, and 990-PF preparation and filing
• Independent audits, reviews, and compilations
• Single Audits for organizations spending federal funds
• Grant and restricted-fund compliance
• Bookkeeping built around fund accounting, functional expenses, and board-ready reporting
• State charitable registration and UBIT (Form 990-T)

Reply to this email by Friday and we will set up a free 15-minute call with one of our senior nonprofit specialists to look at where your organization stands and what it may be risking.

Sincerely,

—

George Dimov, CPA

Licensed and Insured

(833) 829-1120 toll free

(212) 994-8081 Fax

​www.dimovtax.com