Introduction to Tax Exemptions
When this designation is granted, the organization will be exempted from both federal corporate and income taxes for most of their revenue. The tax exemption can be the most appropriate for community organizations. If the organization was involved in lobbying or major political advocacy, it would not be allowed to apply for 501(c) (3) tax exemption.
Types of Exemptions and Process
There is a total of 26 different types of exemptions that are written under the tax code and can be used for different purposes. The best-known tax exemption is 501(c) (3) which is also referred to as a charitable tax exemption. Since our inception in 1995, we’ve assisted over 25,000 organizations and have maintained a 100% IRS approval rate.
Getting Started with Your Nonprofit
The STEPS: Select your name, buy your domain name, Write a mission Statement, do a business search, and incorporate your organization yourself (don’t pay anyone). In this article, we’ll walk you through the ten steps you need to take to get your nonprofit up and running. Assemble your Nonprofit Board of Directors, and conduct your first board meeting. IRS Form 1023 is 29 pages long, plus additional required schedules and attachments. Creating the Nonprofit Bylaws.
Costs and Processing Time
The average processing time for Form 1023-EZ is about 2-4 weeks. By contrast, Form 1023 can take between 3 and 6 months for processing, and it could take up to a year. The IRS will only say that “applications are processed as quickly as possible” and “are processed in the order received by the IRS.”
Disadvantages of a 501(c)(3)
What are the disadvantages of a 501(c)3?
Additional Information
The IRS generally requires a minimum of three board members for every nonprofit, but does not dictate board term length. The IRS Form 1023 filing fee is $600 but Form 1023 EZ can be filed for $275 by organizations that expect less than $50,000 in annual earnings. Filing the articles of incorporation with the state typically costs about $100. A determination letter is sent after applying for the 501(c)(3) exemption. The costs associated with creating a 501(c)(3) can vary according to the needs of the organization but some can be approximated.