How To Change Tax Exempt Filing Type

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Tax-exempt filing applies to the federal W4 for employees, and to businesses that apply for and receive tax-exempt status with the Internal Revenue Service (IRS). The tax-exempt status of an organization will stay in effect as long as the operations stay within the guidelines of the original application. However, changes in IRS or federal law may arbitrarily change the tax exempt status. If an organization wants to change the nature of the business, or if the employee wishes to change the exempt status, there are simple steps to take.

Things You'll Need

  • Communication with the IRS to cease tax-exempt operations
  • Fresh copy of W4 to change exempt status

Stay aware of changes in the IRS code by reading the tax publications regarding changes published at the beginning of each new year. After receiving approval from the IRS to operate as a tax-exempt organization, the business must maintain records and practices to maintain the tax-exempt status. The IRS may change the filing type if there is a change or a new law affecting the tax treaty; if there is a new decision by the U.S. Court, or a change in IRS rulings or procedures.

If the organization wants to change the nature of it is operations, it should notify the IRS. The tax-exempt organization must maintain certain obligations to retain its status. The organization must continue to exist, and operate as originally outlined in the application for tax-exempt status. The organization must file the annual information return Form 990. Before changing direction, call the IRS to have the tax exempt status revoked.

An employee who chooses "Exempt" on Line 7 of the W4 form may submit a revised W4 to the payroll department at any time when circumstances denote the employee is no longer exempt. The W4 is available at the IRS website, or in the payroll department.

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