The 501(c)(3) tax exempt application is only applicable to a 501(c) organization, which is essentially a nonprofit one. Section 501 (c) of the Internal Revenue Code provides that 29 types of nonprofit organizations are exempt from certain federal income taxes. To elaborate further, 501(c)(3) exemptions apply to corporations, any community chest, fund, foundation, or organized business for religious, charitable, scientific, testing for public safety, literary or educational programs.
These “charitable organizations” can naturally, not be involved in any activities that fuel private interests. Neither can the organization’s net earning inure to the benefit of any shareholder or individual. Section 501(c)(3) organizations are also restricted in how much political and legislative lobbying activities they may conduct.
Step by Step 501c3 Application Process
Forms to file
To start the 501c3 tax exempt application you need Form SS-4: Known as the Employer Identification Number (EIN). This is the account number registered with the IRS and is needed whether the organization has employees or not. The EIN must be included on all correspondence with the IRS. After this, apply for the EIN completing Form SS-4, Application for Employer Identification Number. You can do so by dialing (866) 816-2065. Alternatively, you can submit an online version of the form through www.irs.gov. This form is also available at Social Security Administration offices, by requesting through the IRS at (800) 829-3678 and also by downloading the form from the IRS website at www.irs.gov.
This form is also known as “Application for Recognition of Exemption Under Section 501(c)(3)” of the Internal Revenue Code, and you can mail it to the address contained in the instructions. There is a user fee required along with this form, and the IRS does not process 501c3 tax exempt applications unless you’ve made the payment.
Forms 2848 and 8821
The next step is to fill out Form 2848, “Power of Attorney and Declaration of Representative”, since you’ve chosen to give authority to someone other than your principal officer or director. Next, Form 8821 needs to be attached, “Tax Information Authorization”. This enables the IRS to provide information to the individual that’s been given Power of Attorney.
The Right Time to File
Organizations filing for 501c3 tax exempt application need to register Form 1023 at the end of the 27th month, after they have legally declared themselves an organization. A non-private organization doesn’t need to file Form 1023. Not unless its yearly gross receipts exceed $5,000. These forms need to be filed in no less than 90 days, of the end of tax year, in which it surpasses this threshold. I.e. An organization that’s formed on January 1, 2011 and surpasses its gross receipts threshold needs to file Form 1023 before April 30, 2013.
Similarly, an organization formed on the same date but does not exceed the gross receipts threshold until its tax year ending – December 31, 2012. In that case, it must be filed by March 31, 2013.
An IRS tax specialist responsible for looking over applications may ask for additional information in writing. If all information provided establishes that the organization is eligible for exemption and that the IRS will issue a determination letter recognizing the organization’s exempt status. This is a vital document that’s filed in the organization’s permanent record-keeping documents.
During the time which 501(c)(3) tax exempt application is waiting to be processed, you can function as a tax-exempt organization. The EO website www.irs.gov/charities-&-non-profits provides information on how to find out your 501(c)(3) tax exempt status.
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