Compliance, Compliance, Compliance! I know, we sound like a broken record, but unfortunately it is the number one way your non-profit can have big problems. Time for us to explain what the compliance documents are and why they are so important!
Compliance documents are the legal documents required by several governmental agencies in the state of California. These documents include:
- The 199 – a tax return for the Franchise Tax Board
- The 990 – the tax return for the Internal Revenue Service
- A Charitable Trust Renewal (RRF-1) for the Attorney General’s Office
- An Annual Financial Report for the Internal Revenue Service
To remain a legal, functioning entity in our state, you need to produce these documents every year, within four months and 15 days of the end of your fiscal year. (Example: If your PTA’s fiscal year runs July 1 through June 30, these documents are due no later than November 15th.)
The Annual Financial Report is an IRS requirement which basically shows how a non-profit earned money and how they spent it. It could also be considered a budget-to-actual report from your accounting records. This report is most helpful when you go to do your taxes, as it should have the major information that you need.
There are different versions of the tax returns for the IRS and Franchise Tax Board. If you are uncertain about which version of each you are required to file, our Tax Filing Support Center has the most up to date information.
For the 2019-20 tax filing year, the Attorney General has added a new form: the CT-TR-1. Every non-profit in the state which makes under $50,000 will need to fill out this form for this new tax year, to be filed with your RRF-1 – Charitable Trust Renewal. Look at our website and follow us on social media to get the information you need to stay compliant and fill out this new form. We are planning webinars and trainings throughout the coming months to help our PTA units, councils and districts learn how to fill out these forms.
For those of you who think that only PTA’s are required to fill out these forms, that is not correct. Every non-profit in the state of California, from those making as little as a few dollars per year to those earning millions, must be compliant and file these forms. The big difference between PTA and most other non-profits is that you have a support system to help you navigate all these requirements.
There is one document required from every unit, council and district that is not mandated by the government, but is a PTA requirement (and required by our insurance company), and that is the twice-yearly audit. Every six months, a qualified CPA or a member of the PTA, with a committee, should review the records of the treasurer and produce a report. The audit report should then be presented to the executive board members and then finally adopted at a general association meeting. Full details on the audit requirements are available at CAPTA.org.
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