Claiming A Non Profit As Tax Exempt: 4 Steps

Charitable organizations can enjoy the benefits of the non profit tax exempt program from the federal government as long as the above-mentioned entities meet the requirements of the Internal Revenue Code 501(c)(3), known as the "Exemption from tax on corporation, certain trusts, etc.." These groups can be classified as either public charities or private foundations. If your organization falls under this category, filing for a tax exemption is very easy. Follow these 4 simple steps to claim your company's tax benefits:

• Form 1023 - Application for Recognition of Exemption Under Section 501(3)(c). For organizations with no specific application form is prescribed, the exempt request can be submitted through a letter to the IRS.
• Form 1024 - Application for Recognition of Exemption Under Section 501(a)
• Employer Identification Number
• Organizing documents - These include: Articles of Incorporation, Articles of Association, Trust Indenture, Constitution, and other related documents
• Bylaws - Needs to be included if the organization is adopting bylaws, and should be signed if submitted as an attachment.
• Description of activities - Description of the organization's proposed charitable activities including a narrative of anticipated receipts and speculated expenditures.
• Financial data - A detailed financial statements and balance sheet of the 3 preceding years and the current year.
• User fee - Using Form 1023, a payment for determination letter request must be included together with the application. For organizations that will submit the application by a letter, use Form 8718.

Forms 1023, 1024 and 8718 can be downloaded and printed from the IRS website.

2. Double check each document

To make sure that your application will be processed immediately, take time to recheck every document you have to be included in the submission. Use Forms 1023 and 1024 as your guide when doing this. These papers contain instructions and checklists to assist you in gathering and securing every information needed. Do not forget to affix your signature on papers where it is required. Moreover, do not leave any part/question on the forms unanswered or blank. Bear in mind that an incomplete application will be returned, which will delay the process.

3. Submit the non profit tax exempt request

After double checking all of the documents, send and mail the complete application including the user fee and attachments to the IRS' address found on Forms 1023 or 8718. You will find it on the bottom part of the forms. You will notice that applications submitted through express mail and delivery services have different addresses. So, see to it that you send your non profit tax exempt request to the address based on the mail system you use.

4. Wait for a reply from the IRS

Once the IRS receives your papers, the Manager or EO Determinations will review and evaluate your application. A favorable letter of determination is sent on your way if they find your request acceptable. On the other hand, an adverse determination letter will be issued for denied applications, or refer the case to the Exempt Organizations Technical Office for a ruling.