Month: March 2026

California Nonprofits: When the $2 Million Revenue Threshold Requires an Independent Audit

Many nonprofit leaders are unaware that California law requires certain nonprofits to obtain an independent financial audit once they reach a specific revenue level.
Under the California Nonprofit Integrity Act of 2004, charitable organizations that generate $2 million or more in annual gross revenue must obtain an independent audit of their financial statements performed by a Certified Public Accountant (CPA).

Understanding this requirement is essential for maintaining compliance and ensuring financial transparency with donors, board members, and regulators.

What the Law Requires
California Government Code §12586 requires that nonprofits exceeding the $2 million threshold:

  *   Obtain an annual independent audit of their financial statements
  *   Have the audit performed by a licensed CPA following accepted auditing standards
  *   Prepare financial statements using generally accepted accounting principles (GAAP)

Audited financial statements must be made available for inspection by the California Attorney General and the public within nine months after the end of the fiscal year.

Government Grants May Be Excluded
When calculating the $2 million threshold, certain government grants may be excluded if the nonprofit is required to provide a separate accounting of how those funds are used.

Because revenue calculations can vary, organizations approaching the threshold should consult with an experienced CPA.

Nonprofits Must Establish an Audit Committee
Nonprofits that meet the $2 million threshold must also create an independent audit committee to oversee the audit process.

The committee is responsible for recommending the auditor, reviewing the audit, and reporting its findings to the board of directors.

Why This Requirement Matters
Independent audits help ensure:

  *   Accurate financial reporting
  *   Strong internal controls
  *   Greater transparency with donors and funders
  *   Compliance with California regulations


For many nonprofits, the audit process also strengthens financial management and governance.

How Gerber & Company Can Help
Gerber & Company has decades of experience working with nonprofit organizations across California. Our CPA team helps nonprofits understand audit requirements, prepare financial records, and complete audits efficiently and in full compliance with state law.
📞 Phone: (310) 552-1600
📧 Email: info@gerberco.com
Contact us to learn whether your nonprofit may be subject to California’s audit requirement.

5 Tax Tips for High Earners

5 Tax Tips for High EarnersIf you’re a high-income earner, generally defined as household incomes over $350,000, there are some key things you might want to keep in mind come tax season. Here are a few of the strategies to consider that not only maximize your financial benefits but also minimize tax liabilities.

Boost Retirement Contributions

By increasing savings in your 401(k) and IRA accounts, you can reduce your current tax liability while building your nest egg. Here’s a closer look:

  • 401(k)s – In 2026, you can contribute up to $24,500. If you’re over 50, there’s a catch-up option of an extra $8,000, and better still, if you’re between 60-63, the catch-up contribution limit increases to $11,250. By doing these things, you lower your income and, thus, your tax bill.
  • Traditional IRAs – You can contribute up to $7,500 in 2026 with an additional catch-up contribution of $1,100 for individuals age 50 and older. Note that while you can make traditional IRA contributions regardless of income levels, the tax deduction phases out at certain income thresholds.
  • Roth IRAs – These products are popular because they let you sock away after-tax dollars. That said, your eligibility to contribute, capped at $7,500 in 2026, varies with income levels. Taxes are paid up front, but withdrawals, including earnings, are tax-free later. Woot! Beware, however, that the ability to directly contribute to a Roth IRA starts to phase out at $153,000 for single filers and $242,000 for those married filing jointly.

Implement Tax-Efficient Investments

Here are three more strategies to consider for reducing your tax burden:

  • Buy municipal bonds. With these securities, you may gain tax-free income that reduces your taxable income.
  • Buy dividend-paying stocks. Payouts from stocks give you lower-taxed income and wealth growth.
  • Invest in opportunity zones. These zones, defined as underserved, low-income communities, not only offer tax deferral but also provide community investment. Paying it forward pays yourself – and others.

Leverage Charitable Giving

And being strategic about it is critical when trying to reduce your tax bill. For instance, you might set up a donor-advised fund (DAF), which is an efficient way to manage your giving while securing tax benefits. You can set one up through a financial institution or a community foundation. Once you contribute, you’ll get an immediate tax deduction. However, this deduction is subject to certain limitations based on your adjusted gross income (AGI) – 60 percent for cash contributions and 30 percent for contributions of appreciated securities. Still, it reduces your taxable income for the current year. And that’s a good thing.

Gift Assets to Your Family

This is another good strategic move. Both you and your relatives will love it. In fact, the IRS lets you give up to $19,000 per year (as of 2026) without triggering gift taxes. Think college tuition or home down payments. However, while gifting assets can reduce the size of your taxable estate, it does not reduce your taxable income for income tax purposes. But here’s the upside: By using the gift tax exclusion, you’ll avoid increasing your estate tax liability later on.

Utilize Qualified Charitable Distributions (QCDs)

If you’re retired and over 70 ½, QCDs offer a powerful tax advantage. Get this: you can transfer up to $111,000 annually (in 2026) directly from your IRA to qualified charities without counting that amount as taxable income.

These are just a few of the ways high-earners can strategize for taxes. But no matter what tools and strategies you harness, the goal is to put together a smart plan so you can keep more of what you earn.

 

Sources

https://www.farther.com/foundations/tax-planning-strategies-for-high-income-earners#:~:text=401(k)%20and%20IRA%20Contributions,situation%20and%20provide%20personalized%20advice

https://finance.yahoo.com/news/minimum-salary-required-considered-top-170108488.html?guccounter=1