IRS Compliance Checks

NP Ledger automatically checks your books against IRS requirements and flags anything that needs attention before you file your 990. Think of it as a pre-flight checklist -- it catches missing information, incomplete data, and potential issues so you can fix them before they become problems.

• You should have at least one fiscal year of financial data in NP Ledger
• Compliance checks run automatically as part of the 990 Wizard -- you don't need to run them separately
• The checks appear in Step 1 (organization info gaps) and Step 5 (full review) of the wizard

Step 1: Open the 990 Wizard

1. Go to Tax Filing from the sidebar.
2. Start a new filing or resume an existing one for the fiscal year you want to check.
3. Compliance gaps appear immediately in Step 1 as colored warning badges next to the items that need attention.

Step 2: Understand the severity levels

Each gap has a severity level that tells you how urgently it needs to be fixed:

• Red (Critical): These prevent a valid filing. You must fix them before you can file. Examples: missing EIN, no officers on file.
• Orange (High): Strongly recommended to fix. Your filing could be flagged or rejected. Examples: missing organization address, missing city or state.
• Yellow (Medium): You should review these, but they won't block your filing. Examples: unmapped accounts with activity, missing mission statement, schedule threshold warnings.

Step 3: Review each gap

1. In Step 1 of the wizard, look at the warning badges next to each field or section.
2. Click a gap to see:
3. What's missing -- a plain-language description of the problem
4. How to fix it -- specific instructions, often with a direct link to the right settings page
5. Fix what you can directly in the wizard (like updating your mission statement or address).
6. For items that require changes elsewhere (like adding officers), click the Fix link to go to the correct settings page, make the change, then return to the wizard.

Step 4: Review compliance questions

1. In Step 4 of the wizard, answer the governance and activity questions.
2. NP Ledger checks your answers against IRS expectations. For example:
3. If you answer "Yes" to political campaign activities, an explanation field appears (the IRS requires one)
4. If officer compensation exceeds $150,000, Schedule J questions appear automatically
5. If fundraising event receipts exceed $15,000, Schedule G data appears

Step 5: Check the full review

1. In Step 5 of the wizard, scroll to the Items Needing Attention section at the bottom.
2. This is the complete list of all remaining gaps, organized by severity.
3. Address critical and high items before downloading your worksheet.
4. Medium items are noted for your awareness -- discuss with your tax preparer if unsure.

NP Ledger runs checks across several categories:

Organization basics: - EIN is present and formatted correctly (XX-XXXXXXX) - At least one officer or director is on file - Organization address, city, state, and ZIP are complete - Mission statement is present

Financial data: - All accounts with activity are mapped to 990 line items - Revenue minus expenses equals the excess/deficit line (cross-check) - No unexpected negative balances

Schedule thresholds: - Schedule A (Public Support Test): Computes a 5-year public support percentage. Flags if below 33.33% (facts-and-circumstances test may apply) or below 10% (does not pass). - Schedule B (Major Contributors): Identifies donors who gave more than $5,000 or more than 2% of total support. Flags if contributor addresses are missing. - Schedule G (Fundraising Events): Flags if total fundraising event gross receipts exceed $15,000 (Schedule G required). - Schedule J (Officer Compensation): Flags if any officer compensation exceeds $150,000 (Schedule J required). - Schedule M (Noncash Contributions): Flags if total noncash contributions exceed $25,000 (Schedule M required). Checks that in-kind contribution categories are mapped to IRS noncash categories.

Governance and compliance: - Officers have titles assigned - Compensation review process is documented - Board review of 990 is confirmed

• All critical and high severity gaps are resolved before downloading your worksheet
• The cross-check in Step 5 passes (or you've acknowledged the discrepancy)
• Schedule thresholds are reviewed -- even if a schedule isn't required, understanding why it's not can help you plan ahead

• Ignoring medium-severity warnings. They won't block your filing today, but unresolved medium issues often become high or critical next year. Review them and fix what you can.
• Not re-checking after fixes. If you leave the wizard to fix something (like adding an officer in Settings), resume the wizard to verify the gap is resolved.
• Confusing NP Ledger's checks with a formal audit. These checks cover IRS requirements and common issues, but they don't replace a professional tax review or financial audit. Organizations with complex situations should consult a qualified tax advisor.
• Assuming a "pass" on the public support test means no further action. Even with a passing score, you should track your public support percentage year over year. A major donor concentration can push you below the threshold in future years.

Accountant Note: Compliance checks cover requirements under IRC section 6033 and related schedules. The public support test follows IRC section 170(b)(1)(A)(vi) with the 2% per-donor cap per the regulations. Schedule B is not for public disclosure (IRC section 6104(d)(3)(A)). Organizations with unrelated business income (UBTI), foreign operations, or complex compensation arrangements should seek professional guidance beyond what automated checks can provide.

Open the AI Help panel and try: - "What compliance gaps does my organization have?" - "Do I need to file Schedule B?" - "What is the public support test?"