Tax Exemption and 501(c)(3)
The best-known tax exemption is 501(c) (3) which is also referred to as a charitable tax exemption. It can be the most appropriate for community organizations. With this designation, the organization will be exempted from both federal corporate and income taxes for most of their revenue. It will also allow the organization to solicit tax-deductible contributions.
Applying for 501(c)(3) Status
To apply for 501(c)(3) status, nonprofit leaders must meet numerous legal requirements. The process can seem daunting but we’re here to help. In this article, we’ll walk you through the ten steps you need to take to get your nonprofit up and running. The costs associated with creating a 501(c)(3) can vary according to the needs of the organization but some can be approximated.
IRS Form 1023 and Costs
IRS Form 1023 is a crucial step in the process. The average processing time for Form 1023-EZ is about 2-4 weeks, while Form 1023 can take between 3 and 6 months for processing, and it could take up to a year. The IRS generally requires a minimum of three board members for every nonprofit. Filing the articles of incorporation with the state typically costs about $100. The IRS Form 1023 filing fee is $600 but Form 1023 EZ can be filed for $275 by organizations that expect less than $50,000 in annual earnings.