Nonprofit Utopia Podcast · Nonprofit Utopia

Just Checking: What You Need to Do Right Now to Keep Your Nonprofit In Compliance

June 11, 2024·37 min·3 clips

Valerie Leonard reveals that 36% of nonprofits have lost their tax-exempt status just for not filing Form 990 on time.

This episode is a compliance checklist for nonprofit leaders, hosted by Valerie Leonard, founder of Nonprofit Utopia. Leonard focuses on helping emerging leaders start, manage, and scale their organizations while staying legally compliant. The session is framed as a timely guide for organizations approaching their fiscal year-end. Leonard states that 36% of all U.S. nonprofits have lost their tax-exempt status, primarily for failing to file Form 990 for three consecutive years. She emphasizes that in Illinois, failing to file a simple annual report with the Secretary of State can lead to an organization being dissolved. Organizations with over $750,000 in expenditures typically require a financial audit, though funders may require one for smaller amounts. Leonard details the requirement to file both a federal Form 990 and a state-level AG 990-IL, both due five and a half months after the fiscal year ends. She explains that a registered agent must be kept current using Illinois Form NFP 105.10/105.20, sharing a story of an organization that faced a $10,000 penalty after moving and changing agents without notifying the state. For payroll, she stresses the importance of filing Form 941 quarterly and strongly recommends using a payroll service, even with one employee. Obtaining property tax exemptions in Cook County is described as an extremely tedious process requiring forms like PTAX-300 and a county complaint. Leonard notes that nonprofits involved in economic development have a slim chance of receiving a state sales tax exemption in Illinois. She outlines the need to register with multiple state entities, including the Department of Revenue using Form REG-1 and the Department of Employment Security for unemployment insurance (Form UI-1). Organizations must also register with the Attorney General using Form CO-1, with churches using Form CO-3 for different reporting requirements. A surprising claim is that tax-exempt organizations are twice as likely as individual or corporate taxpayers to file annual returns late with the IRS. Leonard argues that most compliance failures stem from a lack of knowledge, not corruption, as many founders mistakenly believe nonprofits don't have to file paperwork. The story of an organization facing dissolution for missing a basic annual report highlights how easily legal status can be lost. The host reveals that even with an attorney and accountant, an organization can face severe penalties if those professionals lack specific nonprofit expertise. She warns that unpaid payroll tax debt can grow faster than most stock market investments due to penalties and interest. Leonard advises that the process for property tax exemption is so complex that listening to her summary is all she is "comfortable with telling you." The tone is educational and conversational, delivered in a straightforward, advisory style as if leading a workshop. Leonard speaks directly to the audience, encouraging them to email her or book a session on her website for further help. The style is checklist-driven, with practical steps and specific form numbers, but includes personal anecdotes to illustrate common pitfalls. This episode is ideal for nonprofit founders, board members, or employees in Illinois seeking a clear compliance roadmap, especially those nearing a fiscal year-end. Listeners outside Illinois may still find the federal guidelines and general principles useful. Those running well-established nonprofits with professional accountants or who are not concerned with regulatory details might find the content too basic or state-specific.

As heard by us

A practical refresher on nonprofit year-end compliance and reporting.

Valerie Leonard lays out the compliance work nonprofit leaders face as fiscal year end approaches. She covers Form 990s, audits, year-end tasks, donor acknowledgments, and the reporting rules that can change with the kind of gift involved.

Read the full review in PlayNext →

Why you'd press play

You need a calm compliance check before fiscal year-end paperwork piles up.

Read the full recommendation in PlayNext →

Listen to the show on

Apple Podcasts Spotify

Play clips from this episode More from Nonprofit Utopia Podcast