If you’re starting up a nonprofit, you probably have questions. You may have heard that charitable organizations can receive tax-exempt status. However, this designation is not automatic. The IRS has fixed regulations on which organizations are eligible and what they must do to qualify.
In today’s post, we map out the steps necessary to making your nonprofit tax-exempt:
Determine your organization type.
Before you begin the application process, you need to establish whether you’re a corporation, association or trust.
Compile your supplementary documentation.
The type of organization you are will determine which type of application for recognition of exemption to submit. In almost all cases, you must enclose with your application a copy of your nonprofit’s organizing document, which is usually one of the following:
- Corporation: articles of incorporation
- LLC: articles of organization
- Association: articles of association
- Trust: trust declaration or agreement
Note that you do not need to submit an organization document if you qualify to submit application form 1023-EZ, which requires that your organization:
- Has not earned more than $50,000 a year for the last three years (if it’s been around that long),
- Anticipates earning less than $50,000 a year for the next three years and
- Has less than $250,000 in total assets.
Understand local requirements.
Next, you must determine Georgia’s requirements for tax-exempt organizations, including how to register and relevant tax information.
Get an EIN.
Once your organization is legally formed, apply for an employer identification number (EIN). This is a federal tax number which the IRS will use to identify you.
If you encounter questions along the way, an experienced business and tax attorney can help walk you through the process and ensure that your organization is set up properly in the eyes of the IRS.