IRS and tax are among some of the scariest words. Dealing with taxation takes a lot of time, effort, documentation, and, of course, money. Even tax exemptions have a lot of rules that most people don’t fully understand. Gain tax exemptions require proper planning and knowledge. The good news is that certain types of businesses may be fully exempted from paying taxes. Here are 7 things to know about tax exemptions in Santa Ana, CA.
7 Things To Know About Tax Exemptions In Santa Ana, CA
1: There is Rarely a Blanket Exemption
Even if your organization qualifies for tax exemption (see later), it doesn’t necessarily mean blanket exemption. It means that you may still need to pay certain state and local taxes despite getting federal tax exemption.
So, make sure to look for all applicable statutes related to taxation, and not only the IRS guidelines.
2: You Cannot Distribute Profits
Normally, non-profit generating entities, such as churches are exempted from taxation. The organization needs to be registered for such purposes. At the same time, some profit generating organizations may also be eligible for tax exemptions. However, remember that any portion of the profit cannot be distributed to the owners/ shareholders.
Distribution of profit straightaway indicated the commercial nature of business, making it eligible for taxation.
3: Tax Exemptions for Sole Proprietor
Simply put, a sole proprietor is never eligible for the tax-exempt status. What it means is that a separate legal business entity is required to be registered for this purpose.
4: Types of Tax-Exempt Organizations
The federal taxation system in the US allows the following type of organizations to register for tax exemption.
“Not for Profit” organizations and entities, such as labor unions, hospitals, shelter homes and credit unions among several others.
Churches and other religious organizations.
Organizations constituted purely for scientific research purposes.
Organizations working for promotion of arts and history, such as art museums and historical societies.
Any association or organization having a minimum of 75% of its members as serving or retired military.
Common interest organizations, such as the chambers of commerce.
International organizations for social causes.
Public schools and other organizations working solely for educational purposes.
Food banks, shelter homes and girls scout organizations.
Agriculture or horticulture promotional organizations.
5: Taking Part in Politics
For any organization claiming for tax exemption, it is strictly prohibited to take part in politics. Any direct or indirect role towards shaping public policy would mean ineligibility for tax exemptions.
Moreover, the IRS also prohibits any sort of political funding by these organizations for similar reasons.
6: Completing the Formal Process
The Internal Revenue Code Sec 501c3 allows such exemptions. You need to make an application for incorporation first of all. This is made to the office of Secretary of State along with all relevant details and documents.
Get your Employer Identification Number and apply to the IRS for the exemption status. Make sure you have the right paperwork and accurate information while applying for the exemption.
7: Time Required for the Application Process
Normally, the IRS takes up to 180 days to decide on the status of your organization after formal application. If you still haven’t heard from them after 180 days, don’t be hesitant to contact the concerned office. However, remember that any error or misstatement on your application may cause the delay.
You may be asked to resubmit the application or certain documents for further processing. Hence, it is crucial to ensure error-free application in the best possible manner. Make sure your application presents a true and fair depiction of your organization’s operations.
USA Tax Settlement strives to help taxpayers get out from under their IRS tax debt. Unlike other so called Best Tax Resolution Companies in Santa Ana, CA that charge outrageous fees and don’t deliver on their promises. USA Tax Settlement employs tax professionals, tax attorneys and IRS enrolled agents so we can provide IRS Tax Debt help in Santa Ana, CA. Stop stressing over your tax debt and let our IRS Tax experts in Santa Ana, CA settle your IRS tax debt for a fraction of a cost. USA Tax Settlement can help with various IRS Tax Relief Programs or Tax Debt Forgiveness Programs. If you need IRS Tax Relief in Santa Ana, CA then call USA Tax Settlement today for a Free Consultation. Remember, having one of the Best Tax Relief companies in Santa Ana, CA on your side is your best first step.
Zee Maq is a content writer who specializes in writing business and finance content. She has nine years of experience and loves to provide problem-solving content to help people tackle challenges in their everyday lives.