Frequently Asked Questions
Non-Profit FAQs
A nonprofit organization is a benevolent organization whose purpose is not to make a profit (get rich) but to help a designated group of people in the community.
A 501c3 is an exemption that nonprofit organizations can apply for through the IRS. This exemption will allow donors to the organization to write-off their contributions as a deduction and allow the funds raised by the organization to not be taxed (tax-exempt).
A nonprofit organization must apply to the IRS to receive 501c3 tax exemption.
No, a nonprofit organization is not required to apply for the 501c3 tax exemption. However, a nonprofit must be recognized by the IRS as a 501c3 nonprofit organization to receive the benefits.
The benefit of being recognized as a 501c3 tax-exempt organization is that the IRS will not tax the money of the organization that was raised for the organization’s charitable purpose AND it allows for people that give to the organization to claim their charitable contributions on their personal taxes. This is incredibly useful when seeking donors, sponsors, and partnerships; and when fundraising.
Nonprofit organizations can receive funding through the sell of goods/services, fundraising, donations/contributions, sponsors, partnerships, loans, and/or grants.
Yes. A nonprofit organization is a business. The revenue that comes into a nonprofit organization can go out to pay for the expenses of the organization including compensation.
No. A nonprofit organization is a community organization that is not owned by anyone. The nonprofit organization is a corporation that is run by the Board of Directors.
Yes. A nonprofit organization is a corporation that is governed by its Board of Directors. The organization must have at least 3 Board Members when formed.
No. A nonprofit organization is a corporation that is a completely separate entity from its founder and Board Members. The organization will file its own tax return if not a 501c3 or informational tax return if it is a 501c3 organization.
No. The 501c3 tax exemption only guarantees that you will not pay taxes on any revenue raised by the organization to further your exempt purpose. Having the 501c3 exemption will allow the organization access to more funding opportunities.
No. Once the IRS recognizes your organization as a 501c3 organization, you will not need to apply again.
You will need to file an informational tax return every year to stay in compliance.
For-Profit FAQs
The Federal EIN (Employee Identification Number) is also known as the Federal Tax ID#. You can get your Federal EIN at www.irs.gov for FREE!!!! DO NOT PAY FOR AN EIN!!! Type “EIN” in the search bar on the IRS website and the online application will appear in the search results.
Church FAQs
The process to start a church is similar to starting a nonprofit organization. You will need to establish your Board, file Articles with your state agency, apply for your Federal EIN, adopt bylaws, and if desired apply for Federal 501c3 tax-exemption.
No. Actually, churches are considered a charitable organization and are automatically tax-exempt because of the purpose of churches. Therefore, churches are not REQUIRED to apply for tax-exemption. Unfortunately, most funders require proof that you are an IRS recognized 501c3 tax-exempt organization which requires the church to go through the application process (catch 22).
No. A church looking to apply for 501c3 tax exemption must you the standard form 1023. A church cannot use the online application form 1023EZ.
No. Unfortunately, the IRS sees a religious organization and a church as two separate things. A religious organization is an organization that has a religious cause or belief. This can be a ministry, outreach, counseling services, schools, etc. A church is an organization that has a group of people that come together at a specified time for religious services or “worship”, that has a designated place of worship, among other things. There are actually 14 characteristics the IRS looks for in organization to be classified as a church. Those characteristics are listed below.
Certain characteristics are generally attributed to churches. These attributes of a church have been developed by the IRS and by court decisions. They include:
- Distinct legal existence
- Recognized creed and form of worship
- Definite and distinct ecclesiastical government
- Formal code of doctrine and discipline
- Distinct religious history
- Membership not associated with any other church or denomination
- Organization of ordained ministers
- Ordained ministers selected after completing prescribed courses of study
- Literature of its own
- Established places of worship
- Regular congregations
- Regular religious services
- Sunday schools for the religious instruction of the young
- Schools for the preparation of its members
An organization classified as a church by the IRS is NOT REQUIRED to file an informational tax return. All other 501c3 nonprofit organizations, including religious organizations, are required to file an information tax return every year.