December 11th, 2014 By Virtual Paralegal Services

So you took your passion and started a nonprofit organization? You wrote your articles of incorporation, bylaws, purpose, and your confidentiality policy. Now you want to receive the well-deserved benefits of being a nonprofit to assist with helping the most people with few resources. One of the great benefits of being a nonprofit -for both you and your donors- is gaining recognized tax exempt status from the Internal Revenue Service under 501(3)(c). Virtual Paralegal Services can assist in filling out the proper forms to gain non profit tax exempt status.

What is 501(3)(c) Status?

Having 501(3)(c) status means the IRS approves you as a charitable organization. For tax exempt purposes, an organization must have a strictly charitable purpose, which includes, religion, literacy, public safety, education, or prevention of animal cruelty or child abuse. A charitable organization also cannot have a substantial part of its activities be political or have the purpose of influencing legislation.

The benefits of this status include being exempt from federal and (sometimes) state income taxes, the ability to apply for specific grant funding, possible exemption from property taxes, and discounted postage for bulk mail. In addition, having 501(3)(c) status allows contributions to the organization to be tax deductible to the person donating.

Prior to July 1, 2014 the only form available to apply for tax exempt status was Form 1023. Now, there is an easier way for qualifying nonprofits to apply. Form 1023-EZ takes the thirty page document and reduces it to an simpler three page form.

How to Qualify

In order to qualify, a non-profit must have gross receipts of under $50,000 and less than $250,000 in assets. However, even an organization that meets those requirements may fall under a list of ineligibilities that make the organization unable to use the form; this includes being a church, university, or hospital.

The form, which needs to be submitted electronically, contains six brief sections. Part I of the form requests basic identifying information for the organization, officers, directors, and trustees. Part II solicits information regarding the organization’s structure, including verification that the organization has the necessary organizing documents. Part III enquires about the specific activities of the organization. Part IV has the applicant decide whether the organization is a public or private charity. The form requires that an officer, director, trustee, or other authorized official sign the document. While most of the questions do not require proof to be submitted, the signatory declares, under penalty of perjury, that the information in the application is true, complete, and correct.

If your application is denied, you have the option to appeal, but it is a much more arduous task. Denial, also known as an adverse determination, can require time and money from the organization. Even with an easier form, getting the right information into the form can be confusing. If you want it done right the first time, contact us as Virtual Paralegal Services. Our knowledgeable and organized paralegals will take the frustration out of filing for nonprofit tax exempt status.

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