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Applying for tax-exempt status? What to know

Posted on August 4, 2021

Organizations ready to apply for recognition of tax-exempt status under Section 501(c)(3) of the IRS tax code will need to fill out Form 1023-series application.

Here are some tips to help understand the process from the Not-for-Profit-savvy CPAs at Teipen CPA Group:

  • First of all, the application process is pretty simple. The application form includes a step-by-step guide explaining how to apply for tax exempt status.
  • Form 1023-series applications must be submitted electronically online atwww.pay.gov. The application must be complete and include the user fee.
  • Some types of organizations don’t need to apply for Section 501(c)(3) status to be tax-exempt. Really? Absolutely! These include churches and their integrated auxiliaries, and public charities with annual gross receipts normally no more than $5,000.
  • You will need an employer identification number, however. This is a nine-digit number that IRS assigns to identify a business’ tax accounts. Every tax-exempt organization should have an EIN, (even if they don’t have any employees). This EIN must be included on the application.
  • Don’t have an EIN? Organizations can get an EIN by calling800-829-4933 or apply online.

The effective date of an organization’s tax exempt status depends on their approved Form 1023. If they submit this form within 27 months after the month they legally formed, the effective date of their organization’s exempt status is the legal date of its formation. If an organization doesn’t submit this form within those 27 months, the effective date of its exempt status is the date it files Form 1023.

Once the IRS determines an organization qualifies for tax exempt status under the law, it will also be classified as a private foundation unless the organization meets the requirements to be treated as a public charity.

Charitable organizations must make certain documents available to the public. These include its approved application for recognition of exemption with all supporting documents and its last three annual information returns. See Publication 557Tax Exempt Status For Your Organization for additional information on public inspection requirements.

Need more info? The IRS website has lots of documents that answer most FAQs:
Applying for exemption – Frequently asked questions
Form 1023 – Frequently asked questions
Stay Exempt – Tax basics for exempt organizations
Exempt organization public disclosure and availability requirements – Frequently asked questions
Disclosure Requirements

But if you need specific questions answered, we are always happy to help. Just give us a call.