Being tax-exempt doesn’t mean your organization is exempt from filing an annual tax return.
For most tax-exempt organizations, the deadline to file Form 990 would’ve been May 15. If you’ve filed an extension, you’re extended filing date may be fast approaching next month.
Not sure where to start?
Step 1 – Collect all your information
While each organization is different and may require different things, it’s best to have the following information on hand
- IRS tax-exempt status and type
- Estimated tax payments made (amounts and dates)
- Organization’s mission and why it is exempt
- List of program accomplishments
- Information for each officer current and former (name, address, title, compensation, benefits, hours worked per week, etc.)
- Financial Records (unrelated business income, revenue, balance sheets, fundraising reports, supporting organizations, records of contributions, records of grants, audited financial statements, 1099s, W2s, and more)
- Assets (depreciation schedules, asset purchase dates, cost, proceeds, mileage on business vehicles, and more)
Step 2 – Select and fill out the right form
There are multiple versions of Form 990 and what form you choose largely depends on factors such as your organization’s gross income and assets.
Here are different 990 variations that you may need to file:
- Form 990-N
- Form 990-EZ
- Form 990
- Form 990-PF
- Form 990-T
If you have a tax-exempt organization and haven’t filed yet, it’s best to file now.
Still, lost? A.K. Burton, PC is here to assist in all your tax preparation needs. Please contact our office with your tax documentation organized and we can help you file your tax return based on your organization’s needs. Call us at (301) 365-1974 for a consultation.
We serve the Bethesda, Rockville, and Montgomery County, MD area.
In our previous blog we covered a number of steps you can take to get tax-exemption for your non-profit that you have just created. There are quite a few steps to take so we had to split the blog up into two.
Anyway, let’s continue, here are the next Steps to take to get Tax-Exempt Status for your Non-Profit, Part 2:
- List of directors and employees and compensation: You will have manager(s) of your charitable organization and the IRS wants to their names and how much they will be paid by the charity. Your list should include: initial or starter directors, starter officers (executive director, financial officer, chief executive officer, secretary and others); trustees; top five employees who make more than $50,000 a year and any independent contractors which make $50,000 per year.
- List of beneficiaries of your charitable organization: Your non-profit serves a specific population (i.e. homeless, elderly, youth, religious group, etc.) and the IRS wants to see that specific list to make sure that you are legitimate. Your population served is a crucial part of your underwriting. (Researching the local, state of national population is helpful and having that on hand to submit to IRS should they ask is wise to do.)
- Description of your non-profit activities: Provide a complete narrative of all that you do and plan to do with your charity. It should include step-by-step workflow (without including every detail, that may be too much) of your activities and how you plan to do it with your staff. Make sure the pieces fit. In other words, there is no waste in your processes and the staff members all have a role. (Political activity and gambling are prohibited. Be sure to research that or consult a licensed tax advisor.)
- Data on finances: Any 501 C 3 must provide its last five years of financial records to the IRS for review. Other groups have to show finances for all years they have been in existence for three to four years and in good faith for future years depending on the history of the organization. (For more details check with your tax advisor about Form 1023 and IRS non-profit requirements.)
- Are you a “Private Foundation” or a “Public Charity”?: Typically churches, temples, hospitals, schools, etc. are categorized as “public charities” whereas “private foundations” may be organizations that exist to donate money to causes, individuals and others (i.e. Gates Foundation, Kiwanis Foundation, etc.). There are specific rules, of course, for these too so please consult your licensed tax advisor.
- IRS Fee: You didn’t think you could do this for free with the IRS, did you? They do charge certain fees and there is a list of those fees available online and with your tax advisor. Be sure to include the fee payment with your filing or it will be delayed.
Yes, anything worthwhile takes work, sometimes a lot of work. But, if you follow these steps you may be able to get your non-profit organization up and running.
Contact us if you need personal or professional counseling, from tax planning, to payroll to Business/Financial Entity planning and many other services, A. K. Burton, PC, can meet all your personal and business accounting needs. Call us at (301) 365-1974 for more information.
There are many intimidating processes in the world of charitable causes. Sometimes, they change over time due to new laws passed by Congress and enforced by the IRS.
It can be difficult keeping track. Your accountant should always be up-to-date on these changes, for sure.
However, when it comes to tax-exemption, once your charitable organization has incorporated, it is fairly cut-and-dry, as they say. But, for a review, here is some guidance from a tax advisor on How to Get Your Non-Profit Tax Exemption, Part 1:
- Complete IRS Form 1023 Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code: Ironically, this first step may be the most difficult. This form has a number of legal and tax-related technical prose within it, making it a laborious venture. You may want to seek advice from your accountant as you embark on this first part.
- File for Non-exempt Status within 27 months of Articles of Incorporation: When you file during this time period, your charitable organization’s tax exemption will take effect on the date you filed for incorporation. When you do that, then all donations received will be tax-deductible. However, should you delay incorporating during this 27-month period without a “reasonable cause”, then your non-profit’s tax-exempt status starts the date of the postmark on the IRS Form 1023 application.
- Form 1023 Completion: This long form has eleven parts to it. If you have a smaller non-profit, then you may want to do the 1023 EZ Form Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. It is quite evident how this form is so much easier for smaller non-profits so go the IRS website and see if your non-profit is eligible.
- Applicant Identification: This is all basic information about your non-profit organization. Your organization needs an EIN (federal employee identification number). Don’t use the old one when you began this process. Request a new on from the IRS as you start this process. It’s actually pretty easy and they send one fairly quickly.
- Structure of the Organization: You need to attach a copy of articles of incorporation and your bylaws. (Just an FYI: If your non-profit is a LLC, unincorporated association or non-profit trust, please contact your tax lawyer. It gets very complicated if you have those designations.)
- Organizational Document’s Required Provisions: You need to add certain clauses to get your 501(c)(3) exemption: a clause stating that your corporation was formed for a recognized 501(c)(3) tax-exempt purpose and a clause stating that that any assets of the nonprofit that remain after the entity dissolves will be distributed to another 501(c)(3) tax-exempt nonprofit or to a federal, state, or local government for a public purpose.
There are several more steps and we will cover those in our next blog. If you need assistance with your non-profit’s tax-exempt status, we can take you through the entire process (and help reduce the stress).
Call us at if you need personal or professional counseling, from tax planning, to payroll to choice of Business/Financial Entity planning and many other services, A. K. Burton, PC, can meet all your private and business accounting needs. Call us at (301) 365-1974 for more information.