Tips to help organizations understand the tax-exempt application process

Organizations that want to apply for tax-exempt status under Section 501(c)(3) of the tax code use a Form 1023-series application. Here are some things organizations should know to help them understand the process:

  • The application must be complete. It must also include the user fee.

  • The application process on IRS.gov includes a step-by-step review of what an organization needs to know and what to do in order to apply for tax-exempt status.

  • There are a few types of organizations that do not need to apply for 501(c)(3) status to be tax-exempt. These are churches and their integrated auxiliaries, and also public charities whose annual gross receipts are normally less than $5,000.

  • An employer identification number is an organization’s account number with the IRS and is required for the organization to apply for tax exempt status. Every tax-exempt organization, including a church, should have an EIN regardless of whether the organization has employees. After getting an EIN, the organization must include it on the application. Organizations may get an EIN by calling 1-800-829-4933 or by applying online.

  • Generally, an organization that is required to apply for recognition of exemption must notify the IRS within 27 months from the date it was formed.

  • When the IRS determines an organization qualifies for exemption under Section 501(c)(3), it will also be classified as a foundation, unless the organization meets the requirements to be treated as a public charity.

  • A charitable organization must make certain documents available to the public. These include its approved application for recognition of exemption with all supporting documents and its last three annual information returns.
     
  • The organization must provide copies of these documents upon request. The organization may charge a reasonable fee for reproduction and copying costs. Organizations that fail to comply may face penalties.

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