Obtaining 501c3 status is a fairly straightforward process for a non-profit organization seeking tax exemptions. Non-profit organizations are those that get a large share of their revenue from the public or the government. In order to qualify for 501c3 status, non-profit organizations must serve religious, educational, literary, public safety, charitable or scientific purposes. Organizations that help prevent cruelty to animals or children, or organize sporting events may also qualify for 501c3 status. Donations made to 501c3 organizations are tax-deductible, a benefit that is unique to this particular tax status.
Filing for 501c3 Status
The first step to obtaining 501c3 status is to file Form 1023 with the IRS. This form is an application for recognition of tax exempt status. Form 1023 can be found on the IRS website here. Included with the forms are the instructions for filing, and an outline of all the requirements for 501c3 status.
Application Requirements for 501c3 Status
Form 1023 requires the applicant to report financial data that shows the source of the organization’s revenue in order for the IRS to determine whether the organization is a non-profit. There are additional forms specific to certain types of non-profits that must be included in the application. For example, churches must file Schedule A, while schools file Schedule B. A complete list of schedules are included in the instructions for filing Form 1023, on the IRS website.
There is also a filing fee. For organizations whose revenue is $10,000 or less per year, the fee is $400. For organizations with revenue in excess of $10,000, the fee is $850. The user fee is subject to change, so always make sure you review the updates to the applications in order to prevent delays in the processing of your application.
Completing the Application for 501c3 Status
Form 1023 asks for a lot of information in order to verify an organization’s qualification for 501c3 status. The application process will be easier if you are organized. Before filling out the application, read it over and make sure you can provide all the information that is asked of you. You will have to submit a written statement that describes your organization’s past, present and future activities. Additionally, you will be required to report the organization’s compensation and other financial arrangements for directors, officers, trustees, employees and independent contractors. Be prepared to submit specific information about the organization’s finances, including revenue and expenses. While most of the application is a series of Yes or No questions, some of the questions require you to provide a written description of your activities.
Don’t be intimidated by the application process. As long as you have all the information that is asked of you on the form, the process is straightforward. Obtaining 501c3 status is not difficult, as long as you remain organized.