Maintaining compliance is one of the most important responsibilities of any nonprofit organization. Staying compliant not only protects your organization’s 501(c)(3) tax-exempt status but also preserves donor confidence and demonstrates transparency to the public and regulators. The following checklist outlines the key steps every nonprofit should follow to ensure ongoing compliance with federal and state requirements.
File Annual Returns with the IRS
Every 501(c)(3) organization must file an annual information return with the IRS. Depending on your organization’s size, this will be Form 990, 990-EZ, or 990-N (e-Postcard). Failure to file for three consecutive years results in automatic revocation of your tax-exempt status. Timely and accurate filing helps maintain good standing with the IRS and ensures continued eligibility for tax-deductible donations.
Stay Current with State Filings
Most states require nonprofits to file annual reports or renewal forms with the Secretary of State and the state charity regulator. These filings update your organization’s corporate information, such as board members and registered addresses. If your nonprofit solicits donations in multiple states, you may also need to register and renew charitable solicitation licenses each year.
Maintain Accurate Governance Records
Good governance is central to compliance. Keep detailed board meeting minutes, up-to-date bylaws, and a conflict of interest policy. The IRS expects nonprofits to operate according to their governing documents and maintain transparency in board decisions. Reviewing your policies regularly ensures they reflect your current operations and legal obligations.
Comply with Employment and Tax Laws
If your organization has employees, make sure you are following federal and state payroll tax rules. File Forms 941 and 940 as required, issue W-2s and 1099s, and withhold the correct taxes. Nonprofits must also comply with employment laws such as the Fair Labor Standards Act (FLSA) and the Americans with Disabilities Act (ADA).
Manage Donor and Financial Records Responsibly
Accurate recordkeeping is essential for accountability. Issue acknowledgment letters for donations of $250 or more, protect donor data, and document how funds are used. Sound financial management supports audit readiness and builds trust with contributors and regulators.
Monitor Public Support and Reporting Requirements
Ensure your organization meets the IRS public support test (33 1/3 rule) to retain public charity status. Regularly reviewing income sources and maintaining transparent reporting practices will help you remain compliant and mission-focused.
Nonprofit Organizations Should be Compliant
By following this checklist, nonprofit leaders can protect their organization’s reputation, avoid costly penalties, and maintain long-term sustainability. For professional assistance, reach out to our expert team today.