IRS’s Application for Recognition of Exemption under section 501(c) (3) of the Internal Revenue Code sets forth the criteria for the non-profit organizations to get the status of tax-exempt. According to law, if an organization is recognized as a non-profit under 501(c) (3), the IRS doesn’t collect tax from said organization in Overland Park, KS. This includes organizations incorporated and operated for charitable, religious, scientific, educational or research purposes, for prevention of cruelty to women, children or animals, to promote national or international amateur sports, and for testing for public safety.
Benefits of Tax-Exempt Status For Your Non-Profit Organization in Overland Park, KS
Before explaining how to get the tax-exempt status for your non-profit organization, let us discuss the benefits of tax-exempt status briefly. If your organization successfully gets the tax-exempt status, the organization will be able to enjoy the following benefits;
- Individuals and organizations can give tax deductible donations to tax-exempt organizations. Donors of 501(c) (3) organizations can claim a tax deduction on their gifts. The purpose of allowing these tax deductions is to encourage charitable contributions.
- Tax-exempt organizations can apply for foundation grants.
- Non-profit mailing privileges can also be obtained under this tax-exempt.
- Your organization can also get exemptions from certain sales taxes or state taxes depending on the state of your incorporation.
- Group incorporated under 501(c) (3) can purchase insurance for its officers and members.
Steps to Get Tax-Exempt Status for Non-Profit Organization
If you are aiming for non-profit tax-exempt status, you can achieve this by fulfilling the following steps.
- Planning and Formation:
The first step in your journey toward tax-exempt status for an organization is planning. You are required to pursue only the activity or activities specifically mentioned in law 501(c) (3). The activities allowed have already been mentioned in the previous section. After determining what activity your organization will perform, you can start the hard process of formation of a non-profit organization.
General Requirements To Form Non-Profit Organization or Corporation
The general requirements of forming the non-profit organization or corporation are stated below;
- Name of the non-profit organization.
- Articles of incorporation.
- Appointment of directors.
- Meeting of directors to appoint/elect officers and to approve bylaws.
- Obtaining state tax identification number.
It is also essential to prepare a business plan for a non-profit organization. Although it is called a non-profit organization, it doesn’t mean that the corporation isn’t allowed to make a profit. However, the profit made by non-profit organizations can only be used for furthering the operations of the organization.
- IRS Paperwork: After getting all the paperwork ready, it is time to file IRS forms SS-4 Application for Employer Identification Number and form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Furthermore, you will be required to fill out one of the schedules (e.g., Schedule A for churches; Schedule B for schools, colleges, and universities; etc.) depending upon the nature of your organization.
- Compliance with Local And State Requirement: In addition to IRS rules and regulation, non-profit organizations are required to show full compliance with state’s as well as local rules and regulations. It is also important to maintain your tax-exempt status by regularly carrying out all legal and institutional requirements.
Starting a non-profit organization is not a difficult task and getting tax-exempt status is also straightforward. You just need to get the paperwork in place, and your organization shouldn’t face any problem.
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