501c3 Tax Exempt Status
Whether you are just beginning your nonprofit or need help completing the final steps, CharityNet USA will prepare all of the necessary documentation on the federal, as well as state level, to secure your organization’s tax exempt status from the IRS.
The recognition of your organization as a 501c3 tax exempt nonprofit by the Internal Revenue Service (IRS) offers numerous advantages and is necessary to help your organization grow. The primary benefits of 501c3 status include:
- Donors can make charitable contributions to your organization and receive a tax deduction. Many times donors will refuse to offer contributions if they will not receive a tax deduction.
- Your organization will be qualified to receive private and public grant money.
- You can save money on lower postage rates on corporate mailings.
If you are looking to form a nonprofit, you will need to go through nonprofit registration and nonprofit filing. Here at CharityNet USA, we can not only guide you through the process, we can also aid you in completing all necessary 501c3 forms to quickly get the tax exempt status so you can begin to receive donations. In addition, if you do not already have your financials, bylaws, articles of incorporation, and similar forms we can complete these for you as well!
Applying for the 501c3 status can be both tedious and complex. If an inexperienced individual attempts to complete the 501c3 application, and does it incorrectly, it can add months of delays to your approval from the IRS. Most individuals who choose to take advantage of our 501c3 services, through our educated and experienced staff, benefit from a faster approval by having the 501c3 application prepared quickly and correctly the first time.
Our listed prices only include preparation fees. We do not collect or pay any state or federal application fees. Based upon your financials and type of application, the IRS filing fee will be either $275 for the 1023EZ application or $600 for the1023 standard application. State incorporation or other filing fees will vary based on your particular state and may change without notice.
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What form is used to apply for 501(c)(3) tax exempt status?
Form 1023 is the standard form used to apply for exemption under IRC 501(c)(3). Some small organizations may be eligible to use the streamlined application, form 1023-EZ.
What types of organizations will qualify for 501(c)(3) tax exempt status?
Religious, Charitable, Scientific, Testing for public safety, Literary, Educational, Fostering Amateur Sports, and Prevention of cruelty to children or animals.
What organizations are eligible for the streamlined 1023-EZ application process?
Generally, small organizations whose GROSS annual receipts will not exceed $50,000 per year, including all cash and non-cash donation. As a rule, this will be organizations planning to operate with a limited scope, and without a paid staff or commercial facility.
What organizations are excluded from using the streamlined 1023-EZ application process?
Most commonly, churches, schools, hospitals, medical and/or mental health clinics, medical research organizations, organizations providing credit counseling, financial literacy training, supporting organizations, organizations converting from a LLC or other for-profit formation, and many organizations who have had a previous exemption revoked are not eligible to use the EZ version of Form 1023. Other less common exclusions also apply.
Can the 1023 application be filed online?
The new Form 1023-EZ is available for filing only online via Pay.gov; the standard application must be filed in hard copy via mail.
How long will the IRS take to make a determination?
On average the IRS takes about 6 months from the time they receive the application package, however there are exceptions. The IRS has not yet released information on 1023-EZ processing times; however it is anticipated they will process more quickly than standard applications?
What are Articles of Incorporation?
Articles of Incorporation are the organizing document for the company. They state the organization’s specific purpose, incorporators, etc. Outline will vary from state to state.
What are Bylaws?
Bylaws are internal operating rules for an organization. They state who should do what, how they should do it, when they should do it, etc. Basic nonprofit template discusses board duties, elections, memberships, and meetings, etc.
Is it required to use a company to complete the paperwork?
No, it is not required but there are many advantages such as faster approval, getting it right the first time. avoid the extra cost of amendments, professional advice and more. CharityNet USA has completed over 15,000 applications and guarantees approval or money back for this reason even CPA’s & Law firms have used our services.
What does the Board of Directors do?
The Board is the governing body of the organization. In most nonprofits the board does not participate in the daily operations of the organization. They must approve major organizational decisions, such as budget, salaries, amending articles or bylaws, etc. These individuals are there to ensure that the organization has the public’s interest at heart, and that all operations are done appropriately. Board functions must be offered on a volunteer basis. Board members may, however, be compensated for any out of pocket expenses. Sometimes, members of the board may also hold a day to day position in the organization. This is a separate position from that which they hold on the board. An individual who happens to be on the board may receive compensation for their daily role in the organization.
How many people do I need on my Board?
501 Board Requirements: Must have at least 3 individuals, the majority of which are not related or receiving any compensation.
What types of financials are necessary for the standard application?
If your organization has been operational for 5 years or more, then actual financial information for the last 5 years is required. If the organization has been in operation for less than 4 years, then we must have the actual financial information for the periods of operation, and projected financials to include a total of 4 years of information. For a start-up organization, a 3 year financial projection is required.
What is Charitable Organization Registration?
Most states require nonprofit organizations to register with the Attorney General or Department of Consumer Services before soliciting donations from the public. This ensures that all organizations requesting donations are in fact legitimate.
If my 501(c)(3) is approved do I still have to pay state income tax and sales tax?
This varies by state. Some states will automatically exempt organizations that have been deemed exempt at the federal level. Other states require organizations to apply separately for state level exemptions.
What filings are required each year once I’m approved?
To remain in compliance the organization must submit a form 990 each year. This form (which comes in a variety of formats depending on the organization’s specific financial situation) must be submitted by the 15th day of the 5th month following the end of the fiscal year. In addition, a variety of annual filings may be required by your state.