IRS 501c3 Status
IRS 501c3 Status is the Way to Go
Non Profits with IRS 501c3 Status are sometimes difficult to start, however very rewarding in their endeavors. Although it may take effort to create a non profit, learn to fund them, and run it successfully, the task is worth it’s weight in gold.
There are a few things that make a huge difference when wanting to start a non profit organization. Many times a week I get asked why a non profit organization should file for IRS 501c3 status. You may or may not know that a non profit can be formed in a given state with non profit status, but not IRS 501c3 status which makes it exempt from taxes. IRS 501c3 status exemption for a non profit is filed in addition to incorporating a nonprofit corporation by completing and submitting the 501c3 form 1023 from the Department of the Treasury Internal Revenue Service. Once this form is submitted and accepted by the IRS, the non profit corporation then becomes exempt from tax.
The Coveted IRS 501c3 Status
This IRS 501c3 status is desired by most organizations doing non profit work. The advantages of IRS 501c3 status are many, including but not limited to, being exempt from tax and being able to accept donations and grant receipts to donors to deduct from their taxes. The ability to grant tax deductible receipts is a huge advantage as it attracts donors who can use the tax deduction.
For many individuals, the ability to deduct donations from their taxes after donating to a tax-exempt non profit is an extra incentive to donate. When given the choice to donate to a non profit with IRS 501c3 status, which either an individual would be allowed the tax deduction or not, many would choose the former. Granted, depending on the individual’s tax status and amount of deductions, the individual may or may not actually be able to use the deduction.
Why IRS 501c3 Status?
One may think to themselves, why wouldn’t every non profit seek IRS 501c3 status? The answer is many times financial and knowledge-based. Seeking exemption IRS 501c3 status through the IRS 501c3 application has steep filing fees associated with it that many non profits when just starting out cannot afford. In addition, the IRS 1023 is lengthy and daunting in its completion. Due to these two reasons alone, many skip applying for IRS 501c3 status exemption and rely on donations for which it’s grantors do not require the tax deduction. It is also possible that donors do not realize that they will not get a tax deduction for their donation when giving to non profit organizations without IRS 501c3 status.
When deciding on whether to file for IRS 501c3 when starting, the decision should not be difficult. Filing for exemption status is the right answer. Getting the status can be expensive, but, there are other ways to obtain IRS 501c3 status without costing a fortune. It is worth your time and energy to look into alternative methods of obtaining exempt status.