Information on Tax Form 501C3
Federal income tax form 501(c)(3) is used to give nonprofit corporations federal tax-exempt status. Any organization that wants the benefits of nonprofit status will have to file the 501(c)(3) forms with the Internal Revenue Service. This is not an easy process, as the 501(c)(3) is not a single form, but an entire package of forms.
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Who Should Use Form 501(c)(3)
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Any nonprofit corporation that wants the benefits of nonprofit status should use the package of 501(c)(3) forms. The benefits of being a nonprofit corporation include being exempt from paying federal and state income tax, and making all charitable contributions to the nonprofit tax-deductible. Churches and organizations with gross receipts under $5,000 a year are automatically tax exempt and do not need to file the 501(c)(3) package of forms. Organizations that need to file the 501(c)(3) forms include trusts, private foundations, associations, publicly supported charities, activity supported charities, supporting organizations for public and activity supported charities, and public safety charities.
Before Filing
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Before a nonprofit corporation can file for a 501(c)(3) tax exemption, it must prepare and file nonprofit articles of incorporation with the corporate filing office of the state it is located in. In order to do this, the organization must have a mission statement, a board of directors, company bylaws, a budget and an accounting system. Once this is completed, the corporation can then file a 501(c)(3) package.
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Learn the Law
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The IRS estimates that it takes around five hours for the average person to review and understand the law behind filling out the 501(c)(3) forms. All of the information on the 501(c)(3) forms and on how to fill them out can be found in the IRS Publication 557, "Tax-Exempt Status for Your Organization." This booklet can be ordered for free by calling 800-TAX-FORM, or it can be downloaded from the IRS website.
Form 1023
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The largest part of the 501(c)(3) package of forms is Form 1023, Application for Recognition of Exemption. Form 1023 asks for a great deal of information, including information on the corporation's organizational structure, description of the corporation's activities, and financial arrangements for all employees and officers. The IRS estimates it will take around nine hours to complete Form 1023.
Documents Needed
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In order to complete the 501(c)(3) package of forms, you will need to submit copies of various documents. For corporations, these include the articles of incorporation and evidence of incorporation in the state where the corporation is located. Associations and trusts will need to include copies of their operating agreement. Detailed financial information for the organization will also need to be included. The IRS will need to see copies of financial statements, including expenses and revenue reports, for any organization that has been in business for three or more years. For organizations that have been in business less than three years, the current financial statement and projected statements for the next two years are required.
Additional Forms
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There are several other forms that may be required to complete the 501(c)(3) package, depending on the circumstances. Form 8717 must be submitted along with Form 1023, and contains information about the application fee. To obtain an employer identification number, the organization will need to include Form SS-4. If Form 1023 or the entire 501(c)(3) package is being filled out by someone who does not belong to the organization, such as a lawyer or an accountant, then Form 2848 must also be included. This gives that person power of attorney to fill out the forms and answer questions from the IRS on the organization's behalf.
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References
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