Obtaining federal tax-exempt status is somewhat of a mystery for my incorporated business owners. Gaining tax-exempt status for your nonprofit 501(c)(3) organization is necessary to reap the majority of the real benefits, such as access to grant money, income exemptions, property exemption, and tax-deductions for donations received. Therefore, it’s important to understand the steps to successfully apply for tax-exempt status.
Planning and Forming a Nonprofit
When forming a business that you plan on being a nonprofit you must plan the organization to not incur profits that benefit an individual and that also provides a public benefit. These types of 501(c)(3) organizations fall into the categories of religious, charitable, scientific, testing for public safety, prevention …show more content…
Because the process can differ from state to state, it is highly advisable to seek the assistance of a profession in your area that is well versed in forming corporation. Essentially, you'll need to create a unique name, prepare and file articles of incorporation, appoint at least one director, create the organizations bylaws, and obtain a tax identification number.
Filing IRS Form 1023
Incorporated businesses seeking tax-exempt status need to file an IRS Form 1023, otherwise called the Application of Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, within 27 months of filing your nonprofit articles of incorporation. File within this time frame and your nonprofit tax exemption takes place when you filed your articles of incorporation. However, if you filed later the tax-exempt status will begin on the postmark date of the Form 1023. For smaller organizations, ask your CPA if you qualify to file a streamlined version of the Form 1023, known as a Form 1023-EZ.
Maintaining Your
Planning and Forming a Nonprofit
When forming a business that you plan on being a nonprofit you must plan the organization to not incur profits that benefit an individual and that also provides a public benefit. These types of 501(c)(3) organizations fall into the categories of religious, charitable, scientific, testing for public safety, prevention …show more content…
Because the process can differ from state to state, it is highly advisable to seek the assistance of a profession in your area that is well versed in forming corporation. Essentially, you'll need to create a unique name, prepare and file articles of incorporation, appoint at least one director, create the organizations bylaws, and obtain a tax identification number.
Filing IRS Form 1023
Incorporated businesses seeking tax-exempt status need to file an IRS Form 1023, otherwise called the Application of Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, within 27 months of filing your nonprofit articles of incorporation. File within this time frame and your nonprofit tax exemption takes place when you filed your articles of incorporation. However, if you filed later the tax-exempt status will begin on the postmark date of the Form 1023. For smaller organizations, ask your CPA if you qualify to file a streamlined version of the Form 1023, known as a Form 1023-EZ.
Maintaining Your