501c3 Application: An Introduction
The tax exempt status for your organization does seem like a good idea. Many organizations i.e. non-profits would like to gain the 501c3 status benefits for their non-profit organizaiton.
So what does the 501c3 status mean to the organization?
“A 501(c)(3) organization is simply a nonprofit organization (usually incorporated) that has applied for and obtained recognition of tax exemption by the Internal Revenue Service (IRS)”
Thus, the 501c3 status is an IRS designation. But who will fill out the form 23? It seems to be designed to be difficult to fill out! According to certain IRS statistics, about 23% of applications for tax exempt status are not granted. This is because the applicants drop out of the process, not because the IRS rejects them. The IRS estimates that Form 1023 take an estimated 105 hours to complete.
Applicants drop out because of the IRS questions and their requests for more transparency discourage the charity. It is best to have your affairs in order and in addition to that, so you should seek to be established at the state level before going for the federal tax exemption. What you need to do is get yourself registered or incorporated at the state level first.
The time taken to complete the form itself can run into a couple of weeks or into a couple of months. Applicants usually believe that once they fill out the form they will be able to get tax exempt status in a matter of a few days. The process of gaining tax exemption is serious and the IRS can take up to many months to review and process your organizations application. There have been instances where for some reason the non-profit has delayed the filing of the 501c3 and
In case you have made a mistake or provided misinformation the IRS will request additional information to clarify the information you submitted on your original application. So, the sooner your form gets onto an IRS agents desk, the better chance you have of succeeding in securing the exemption within the 27 month time period.
This articles was commissioned by Nonprofit Foundry, LLC, Milwaukee WI. It is not legal advice. Every situation is unique based on facts and circumstances. If you need legal advise contact an attorney.
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