Keeping the IRS Happy​

Required Activities
1. Do Good - Your organization must carry on the exempt activities that are the basis of your 501(c)(3) status. Some periods of inactivity are permitted, but if, for instance, your organization raises funds and then just sits on them, your exempt status

can be revoked.

2. Keep Good Records- "Inadequate records" is a leading reason for the IRS to issue an advisory-type warning after an audit.  IRS Publication 4221-PC has several pages of information about recordkeeping.  
3.Keep the IRS Informed of Changes- Name changes, address changes, and changes in an organization's structure or operations must be reported to the IRS.  Find out more at Update Your IRS Information.

4.File Required Returns
     a.Table of Exempt Organization Returns and Penalties (PDF)
     b.Table of Employment Taxes and Forms for Employers (PDF)
     c. Gross Receipts Less Than $25,000: You may read or hear that IRS Form 990, the annual "Return of Organization Exempt    

     From Income Tax," is not required when gross receipts are less than $25,000.  This information is outdated.
5. Provide Substantiation for Your Donors
     a. Donor Substantiation
     b. Sample Acknowledgment Letter (PDF)​
6. Obey Disclosure Laws - All 501(c) organizations must make copies of their annual returns and exemption applications available for public inspection, and must provide copies upon request.  Penalties apply for failure to meet these requirements.
7. Generate Public Support

Forbidden Activities
1. Inurement/Excess Benefit
2. Political Activity

3. Illegal Activity - this one almost goes without saying.  (Note, as well, that the law provides for suspension of an organization's tax exempt status if it conducts terrorism or is communist-controlled.)

Activities Which Are Permitted, But Must be Limited and May Be Taxed
1. Legislative Activity
2. Unrelated Business Activity