Steps to get tax-exempt status as a nonprofit organization
Is it possible to get the tax-exempt status even if you are a nonprofit? Yes, you can do that, but it’s important to note that you need to file for the tax-exempt status, you can’t just get it randomly, which is something that you really need to take into consideration in a situation like this. What you want to do is to make sure that you apply for this status with the IRS and then you wait for their approval. Thankfully, that will not take a huge amount of time, if you file correctly.
What does the tax-exempt status mean?
What this means is that the net profits are exempt from income taxes. This allows you to focus more on growing your business while also showing that you don’t really have to pay taxes on this according to the law. It means a lot to get the tax-exempt status, but it will take a little bit of time to achieve that, so try to take it into consideration for the best possible results as much as possible.
Steps that you need to follow:
• The first thing you need to do is to incorporate, as this will create the nonprofit within your state. You also have to provide a copy of your articles of incorporation too.
• Now you will have to apply for the EIN. You need to have the employer identification number regardless of how many employees you will have. In order to do that you need to file the form SS-4 with the IRS.
• Within the articles of incorporation you need to provide an explanation of what you want to achieve with the nonprofit. The IRS will review this, so your explanation is very important if you want to get the tax-exempt status.
• You will now have to file form 1023 with the IRS. This is the form you use for this process, it’s around 30 pages long and you need to make sure that you are getting the latest version just to be safe.
• There are some filing fees that you need to pay, $600 for the Form 1023 filing and $275 for the 1023-EZ filing depending on the situation.
• When should you file for the tax-exempt status? Most nonprofits tend to file towards the end of the month, before the 27 th.
• Double-check the application just to be safe, and you will have no problem applying very quickly for the tax-exempt status.
Why should you apply for the tax-exempt status?
All the donations to your nonprofit will be tax deductible. On top of that, the tax-exempt status suggests that the IRS shows your business is credible, so people will trust you more. There are US postal service discounts, you can gain access to grants as well.
While applying for the tax-exempt status can take a little bit of time, it’s definitely a very good idea to start doing it right away. It will help immensely and the results you can get are extraordinary. We recommend you to double-check all these great tips and then you will have no problem filing for the tax- exempt status right away!