Most of the time, as tax accountant in Orlando, we have to educate persons interests in a 501c3 tax exempt application that a nonprofit organization means any corporation that functions for promotion of its interest rather than to earn profit. Federal government distinguishes charitable organizations into the following categories:

  • A corporation,
  • An unincorporated organization, and
  • A trust.

To facilitate the spirit of philanthropy, federal government grants tax-exemption status to certain not for profit corporations. Popularly known as “Charitable tax exemption”, this status is achieved through a 501c3 tax exempt application which is filed with the IRS.

The 501c3 tax exempt application process for the tax exempt process is fairly long and requires submission of Form 1023 for 501(c) (3) organizations and Form 1024 for others. Once the form has been filled with the IRS, it can take up to months to procure the status. While the applying for the status is a daunting and a time consuming process, you will benefit in several ways by the renewed status. Here are some advantages of the ‘tax-exempt’ status:

  1. The status gives you fiduciary powers to attain funds directly from the state. A tax exempt organization can approach the state directly and negotiate for the funds.
  2. The tax-exempt status is also extended to the members of the organization. Members can contribute to such organization and can apply for a grand and reduction in their tax burden.
  3. The status grant allows you greater freedom as you have legitimized your operations. With the new status, you can approach potential donor for funds directly.

However, the tax exempt does have some drawbacks and limitations. Some of them include:

  1. Incorporation process is fairly complex process that adds to the responsibility of the corporation. A newly incorporated organization might not have required capabilities to handle such responsibilities. For instance, it is mandatory that all tax exempt organizations file an annual tax return with the organization.
  2. With the filing process, comes the added cost that is required while filing the application. The application process can include filing cost and the fees of lawyers and advisers.
  3. Attaining the tax exempt status can be diversion for a newly formed company as the focus of a new corporation must be on attaining and building a clientele.
  4. After you have attained the status, you will be prohibited from participating in certain activities such as gambling.

The tax exempt status can prove to be a lucrative incentive for potential donors. While it is a tedious process, the status can greatly improve your surplus and the probability of attaining greater amount of funds. Given the right time, the tax can certainly be beneficial to your corporation. Here are some suggestions as to when applying for the status can be beneficial:

  • When the corporation has proven its worth within the community it’s operating in.
  • When the leaders and members of the corporation are committed to provide continuing support.
  • When the corporation requires constant supply of funds to achieve its objective.

While doing a 501c3 tax exempt status application, ensure that your receipts and expenses invoices are in order as it makes the filing process relatively easy. In case of any legal advice, it is always best to seek help from a fiduciary agent.

If you need more information about our, Orlando accounting and tax services, please contact us at 407-502-2400.  Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years.  Our Orlando accounting and tax firm has its main offices in Kissimmee, FL.  Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, and Hunters Creek, FL.  Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin numbers, incorporations, and non profit 501c3 tax exempt status applications.

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