Blog - Page 5 of 7 - Nonprofit Corporations & Charitable Organizations

Getting an Employer ID Number

Question: How do I get an Employer Identification Number (EIN) for my organization?

Answer: You can apply for an EIN on-line, over the telephone, via fax or through the mail. See the instructions for Form SS-4 , Application for Employer I.D. Number, for further details.

To apply on-line, use the on-line EIN application available on this website.
To get an EIN over the IRS’s toll-free telephone number, call (800) 829-4933. See EIN Toll-Free Telephone Service for more information.
To request an EIN via fax, 24 hours a day / 7 days a week, dial the fax number at the location accepting applications from your state. The instructions on the Form SS-4 indicate which location will accept your faxed request.
To receive an EIN through the mail, complete Form SS-4 . The instructions for the form provide the correct address.

Third parties can receive an EIN on a client’s behalf by completing the new “Third Party Designee” section and obtaining the client’s signature on Form SS-4. This avoids having to file a Form 2848 (Power of Attorney) or Form 8821 (Tax Information Authorization) to get an EIN for their client.

Note: Don’t apply for an EIN until your organization is legally formed. Nearly all organizations are subject to automatic revocation of their tax-exempt status if they fail to file a required return or notice for three consecutive years. When you apply for an EIN, the IRS presumes the organization has been legally formed and the clock starts running on this three-year period.

On the Net2018-05-13T12:21:21-07:00FAQs|0 Comments

Beware of Impersonation of Charitable Organizations Scams

Another long-standing type of abuse or fraud is scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims. The IRS cautions both victims of natural disasters and people wishing to make charitable donations to avoid scam artists by following these tips:

To help disaster victims, donate to recognized charities.

Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.

Don’t give out personal financial information, such as Social Security numbers or credit card and bank account numbers and passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.

Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

Call the IRS toll-free disaster assistance telephone number (866-562-5227) if you are a disaster victim with specific questions about tax relief or disaster related tax issues.

On the Net2018-01-14T10:38:14-07:00IRS News, Miscellaneous|0 Comments

Difference between Tax Exempt & Nonprofit

Question: What is the difference between nonprofit and tax-exempt status?

Answer: Nonprofit status is a state law concept. Nonprofit status may make an organization eligible for certain benefits, such as state sales, property and income tax exemptions. Although most federal tax-exempt organizations are nonprofit organizations, organizing as a nonprofit organization at the state level does not automatically grant the organization exemption from federal income tax. To qualify as exempt from federal income tax, an organization must meet requirements set forth in the Internal Revenue Code. See Types of Tax-Exempt Organizations or Publication 557 for more information.

On the Net2014-08-08T19:32:23-07:00FAQs|0 Comments

Will the IRS Expedite Review of an Application for Exemption?

Question: How can my application for tax-exempt status be expedited?

Answer: In general, applications are processed in the order received by the IRS. Sometimes, however, the IRS will work a case outside the regular order. For expedited processing to be granted, however, there must be a compelling reason to process the case ahead of others. Compelling reasons include the following:

A pending grant, where failure to secure the grant will have an adverse impact on the organization’s ability to continue operating.
A newly created organization providing disaster relief to victims of emergencies.
IRS errors have caused undue delays in issuing a determination letter.

For a pending grant, the following specific information would help support a request for expedited processing:

The name of the person or organization committed to giving the grant or asset,
The amount of the grant or the value of the asset,
The date the grant will be forfeited or permanently redirected to another organization,
The impact on the organization’s operations if it does not receive the grant/asset, and
The signature of a principal officer or authorized representative.

A request for expedited processing must be made in writing and must fully explain the compelling reason. Granting expedited processing is at the discretion of the IRS.

Note: An optional expedited process is available for certain 501(c)(4) applicants.

Additional information – Examples

On the Net2018-05-13T12:21:22-07:00FAQs|0 Comments

Application for a Tax Exemption

Question: How do I obtain an application for tax-exempt status?

Answer: Most organizations applying for exemption must use specific application forms. Two forms currently prescribed by the Service are Application for Recognition of Exemption Form 1023 (and instructions) (for charitable organizations); and Package 1024, Application for Recognition of Exemption (for other tax-exempt organizations). The application your organization is required to submit is specified in Publication 557 . You may request forms by calling 1-800-TAX-FORM (1-800-829-3676).

On the Net2018-10-28T09:03:48-07:00FAQs|0 Comments

When Does an Application for Tax Exemption Become Public?

Question: Is an exemption application subject to public disclosure?

Answer: An exemption application is subject to public disclosure once it has been finally approved or denied.

On the Net2014-08-08T20:48:09-07:00FAQs|0 Comments

Change in Purpose While Tax Exempt Application is Pending

Question: What if purposes or programs change after an application is submitted?

Answer: If the organization’s organizing documents, purposes, or programs change while the IRS is considering an application, you should report the change in writing to the office processing your application. If you do not know the office that is processing your exemption application, contact Exempt Organizations Customer Account Services.

Because material changes in a charity’s structure or activities may affect its tax-exempt or public charity status, organizations should report such changes to the IRS Exempt Organizations Division. See procedures for reporting changes for a complete discussion

On the Net2014-08-08T20:29:07-07:00FAQs|0 Comments

How Do I Learn More about the Tax Exempt Application Process?

Question: Where can I get more information about how an organization can apply for exemption from federal income tax?

Answer: The following IRS materials provide more information about the application process:

Frequently asked questions about Form 1023
Publication 4220, Applying for 501(c)(3) Tax-Exempt Status
Publication 557, Tax-Exempt Status for Your Organization
Publication 4573, Group Exemptions
Publication 1635, Understanding Your EIN
Application for Recognition of Exemption (501(c)(3))
Application for Recognition of Exemption (non-501(c)(3))
Application Process: A step-by-step review of what an organization needs to know and to do in order to apply for recognition by the IRS of tax-exempt status.

On the Net2016-12-19T21:45:48-07:00FAQs|0 Comments

How to Have Tax-Exempt Status Retroactively Reinstated After Automatic Revocation

Organizations whose tax-exempt status was automatically revoked because they did not file required 990 series returns or notices for three consecutive years can apply for reinstatement of their tax-exempt status.

In a new Revenue Procedure 2014-11, the IRS explains the four procedures an organization may use to apply for reinstatement.

Streamlined Retroactive Reinstatement

Organizations that were eligible to file 990-EZ or 990-N (ePostcard) for the three years that caused their revocation may have their tax-exempt status retroactively reinstated to the date of revocation if they:

Have not previously had their tax-exempt status automatically revoked.
Complete and submit Form 1023 or Form 1024 with the appropriate user fee not later than 15 months after the later of the date of the organization’s Revocation Letter (CP-120A) or the date the organization appeared on the Revocation List on the IRS website.

These organizations should write on the top of the Form 1023 or Form 1024, “Revenue Procedure 2014-11, Streamlined Retroactive Reinstatement,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
Covington, KY 41012-0192

In addition, the Service will not impose the Section 6652(c) penalty for failure to file annual returns for the three consecutive taxable years that caused the organization to be revoked if the organization is retroactively reinstated under this procedure and files properly completed and executed paper Forms 990-EZ for all such taxable years. (For any year for which the organization was eligible to file a Form 990-N, the organization is not required to file a prior year Form 990-N or Form 990-EZ to avoid penalties.) The organization should write “Retroactive Reinstatement” on the Forms 990-EZ and mail them to:

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0027

Retroactive Reinstatement Process (Within 15 Months)

Organizations that cannot use the Streamlined Retroactive Reinstatement Process (such as those that were required to file Form 990 or Form 990-PF for any of the three years that caused revocation or those that were previously auto-revoked) may have their tax-exempt status retroactively reinstated to the date of revocation if they:

Complete and submit Form 1023 or Form 1024 with the appropriate user fee not later than 15 months after the later of the date on the organization’s revocation letter (CP-120A) or the date the organization appeared on the Revocation List on the IRS website.
Include with the application a statement establishing that the organization had reasonable cause for its failure to file a required annual return for at least one of the three consecutive years in which it failed to file.
Include with the application a statement confirming that it has filed required returns for those three years and for any other taxable years after such period and before the post-mark date of the application for which required returns were due and not filed.
File properly completed and executed paper annual returns for the three consecutive years that caused the revocation and any following years. The organization should write “Retroactive Reinstatement” on these returns and mail them to:

Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0027

These organizations should write on the top of the Form 1023 or Form 1024, “Revenue Procedure 2014-11, Retroactive Reinstatement,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
Covington, KY 41012-0192

In addition, the Service will not impose the Section 6652(c) penalty for failure to file annual returns for the three consecutive taxable years that caused the organization to be revoked if the organization is retroactively reinstated under this procedure.

Retroactive Reinstatement (After 15 Months)

Organizations that apply for reinstatement more than 15 months after the later of the date on the organization’s revocation letter (CP-120A) or the date the organization appeared on the Revocation List on the IRS website may have their tax-exempt status retroactively reinstated to the date of revocation if they:

Satisfy all of the requirements described under the “Retroactive Reinstatement (Within 15 Months)” procedure EXCEPT that the reasonable cause statement the organization includes with its application must establish reasonable cause for its failure to file a required annual return for all three consecutive years in which it failed to file.

In addition, the Service will not impose the Section 6652(c) penalty for failure to file annual returns for the three consecutive taxable years that caused the organization to be revoked if the organization is retroactively reinstated under this procedure.

Post-Mark Date Reinstatement

Organizations may apply for reinstatement effective from the post-mark date of their application if they:

Complete and submit Form 1023 or Form 1024 with the appropriate user fee.

These organizations should write on the top of the Form 1023 or Form 1024, “Revenue Procedure 2014-11, Reinstatement Post-Mark Date,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
Covington, KY 41012-0192

What’s a Reasonable Cause Statement?

A reasonable cause statement establishes that an organization exercised ordinary business care and prudence in determining and attempting to comply with its annual reporting requirement. The statement should have a detailed description of all the facts and circumstances about why the organization failed to file, how it discovered the failure, and the steps it has taken or will take to avoid or mitigate future failures. For a detailed explanation see Section 8 of Revenue Procedure 2014-11.

Pending Reinstatement Applications and Previously Granted Applications

The reinstatement processes above apply to pending reinstatement applications to the extent they benefit an organization’s ability to be retroactively reinstated.

For organizations that have been previously reinstated from the post-mark date but would have satisfied the streamlined retroactive reinstatement process requirements, they will be retroactively reinstated with no further action. They should keep their reinstatement determination letters and a copy of Revenue Procedure 2014-11.

For organizations that have been previously reinstated from the post-mark date but would have satisfied either the retroactive reinstatement within 15 months process requirements or the retroactive reinstatement after 15 months process requirements, they may reapply under Revenue Procedure 2014-11 on or before May 2, 2014. See Section 10 of Revenue Procedure 2014-11 for details.

Avoid Being Automatically Revoked Again – File Annual Returns

An organization can be automatically revoked again if it fails to file required returns for three consecutive years beginning with the year in which the IRS approves the application for reinstatement. Organizations seeking reinstatement of tax-exempt status after a subsequent revocation are not eligible to use the Streamlined Retroactive Reinstatement Process.

On the Net2018-01-14T10:38:14-07:00Applications for Exemption|0 Comments

Deductions for Contributions Made to a Charity before Its Tax-exemption Application is Approved

Question: My Arizona nonprofit corporation filed its IRS Form 1023 and applied to the IRS to become a tax-exempt charitable organization. We understand that the current average time for the IRS to approve an application for tax-exempt status is sixteen months. Can we tell prospective donors that their contributions to our charity while its tax-exempt application is pending are tax deductible on their IRS Form 1040s?

Answer: “Yes, but your organization should include the warning that contributions are tax deductible so long as the organization actually gets its tax exemption.

When the IRS approves a timely filed exemption application, exempt status is recognized back to the date the organization was created. Thus, while an application is pending, the organization can treat itself as exempt from federal income tax under section 501(c)(3). For example, it must file Form 990 (instead of an income tax return) while its application is pending. However, contributors to the organization do not have advance assurance of deductibility because the organization’s exemption is pending. If the organization ultimately qualifies for exemption for the period in which the contribution is made, the contribution will be tax-deductible by the donor. Alternatively, if the organization ultimately does not qualify for exemption, then the contribution will not be tax deductible.

On the Net2018-01-14T10:38:14-07:00Applications for Exemption, FAQs|0 Comments