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What is 501 (C) Federal Exemption for Non profit Organizations?

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Category : > Non Profit Religious and Non Religious Organization
Posted On : Wed Jan 27th,2010


What is 501 (C) Federal Exemption for Non profit Organization?


According to the Internal Revenue Code, the nonprofit organizations or not-for profit organizations are exempted from a few federal income taxes; like Religious Corporation, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition or Prevention of Cruelty to Children or Animals Organizations and not-for profit organization can take pleasure of this facility.


Benefits for 501(c) status

The benefits for the non-profit organization of having 501(c) condition include exemption from federal income tax and eligibility to receive tax-deductible giving donations. Another benefit is that some organizations may be exempt from certain employment taxes.


Eligibility Criteria for 501 (c)

There are three key mechanisms for an organization to be exempt from federal income tax. The not-for profit organization must be organized and operated exclu­sively for one or more exempt purposes.

Organized: An organization must be prearranged as a company, trust, or unincorporated association. An organization’s systematized documents (articles of incorporation, trust documents, articles of association)


Operated: Because a extensive portion of these non-profit organization’s activities must further its exempt purpose(s), certain other activities are not allowed


Exempt purpose: An organiza­tion must have one or more exempt purposes, exempt pur­poses: charitable, educational, religious, scientific, literary, fostering national or international sports competition, preventing cruelty to children or ani­mals, and testing for public safety or Register non-profit organization


Duties of a accompany

While conferring benefits on 501(c) organizations, federal tax law also imposes responsibilities on organizations receiving that status.

Record Keeping: Non-profit and religious Organizations are required to create and maintain books and records detailing all actions, both financial and non-financial.


Filing Prerequisites

Annual Information Returns: Organizations recognized as tax exempt may be required to file an annual information return along with certain schedules that may be required for organizations. Certain categories of organizations are accepted from filing including nonprofit Religious Corporation and very small organizations.

Annual Electronic Notice: Small organizations are not required to file however; these nonprofit and religious organizations must submit an annual electronic notice using, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not required.


Disclosure Prerequisite

Public check of Exemption Applications and Returns: Non-profit Organizations have to make their application and the annual returns, available to the public for inspection, upon request and without charge (except for a reasonable charge for copying). Each annual return must be made available for a three-year period starting with the filing date of the return.



Charitable Contributions — Confirmation and Disclosure: The Non-profit Organizations that are tax exempt must meet certain requirements for documenting charitable contri­butions The federal tax law requires two general disclosure regulations: 1) a contributor must obtain a on paper recognition from a charity for any single con­tribution before the contributor can claim a charitable contribution on his/her federal income tax return 2) A charitable organization must provide a written disclosure to a donor who makes a payment in surplus.


Documents keeping Requirements A contributor cannot claim a tax subtraction for any con­tribution of cash, a check or other financial gift made on unless the donor maintains a record of the contribution in the form of either a bank record a written communication from the charity showing the name of the charity, the date of the contribution, and the amount of the contribution.


Guideline to Apply for 501 (c)

Non-profit Organizations that want to apply for 501(c) status should be aware of the forms required, the user fee, the filing deadline, and the processing procedures.


When to claim

Non-profit Organizations must file by the end of the 15th month after they were created, with a 12-month extension available. An organization that is not a private foundation is not required to file. An organization must file within 90 days of the end of the year in which it exceeds this threshold.



Determination Letter

Tax consultant reviewing an application may request additional information in writing. If all information received establishes that an organi­zation gather the requirements for exemption, determination letter will issue to recognizing the non-profit organization’s exempt status and providing its public charity categorization. This is a main document that should be kept in the organization’s everlasting records.



While Application is awaiting

When the non-profit organization’s is waiting for approval, the organization may operate as a tax-exempt organization. If an annual exempt organization return is due, the non-profit organization must file it, indicating that its application is awaiting. These returns are subject to public disclosure.


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Comments (2)
Carl Ingram   wrote on : Fri Sep 03rd,2010
Hello, recently my neighborhood started a civic association. We are a non profit organization and require no membership fees and will rely strictly on donations from members of the association. Do we need to apply for a 501c tax exemption? The bank said we did to open an account. Do we just need a tax ID number? Carl      View Detail
Reply :
Dear Carl Ingram:

If you are collecting funds for a cause then yes, you are required to file 501c. If you want to use our services then please either call us at +1 (866)754 4460 or use the following link to apply.
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Franklin Frigillana   wrote on : Tue Feb 15th,2011
We have an incorparated, a religious, educational and charitable organization: "The Amazing Grace Community Outreach" and we want to change the initial Directors because they don't have much time due to loaded schedule of work. Is this possible ? I am looking forward to apply for 501(c) for this program..      View Detail
Reply :
Dear Franklin Frigillana,

Thanks for choosing for your business needs.

  1. Yes, you can change the initial directors by notifying to the proper departments if they are willing to resign.
  2. As far as the 501 (c) is concerned you can please call us at 516.822.3100 for quotations. Estimated we charge $700.00+State Filing Fees (state Filing fess could be from $450.00 to $800.00) depends on the scope of the function of you exempt organization
For any question please do not hesitate to contact us.

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