10 Do's and Don'ts to Maintain Your Tax Exempt Status

Organizations worldwide have applied and received 501(c)(3) tax exempt status from the IRS for years. Groups such as private foundations along with churches, hospitals, educational institutions and charities are exempt from federal income tax under the Internal Revenue Code. Maintaining this status can be just as easy as it is to lose it. 

Each year, over 100 501(c)(3) organizations have their tax-exempt status revoked. The most common cause of revocation is due to organizations that do not file their annual information return with the IRS for three consecutive years. These organizations find themselves in distress after being revoked and find out that it can be quite the hassle to bounce back from. 

An automatically revoked organization loses the eligibility to receive tax-deductible contributions as well being removed from a list of tax-exempt organizations that most donors reference prior to giving. Eliminate the worry and concern of ever having to be revoked or losing your tax-exempt status by following these “do’s and don’ts” to ensure you stay on the right track: 

"DO'S AND DON'TS"

DO’s: 

• 1. File annual information returns with the IRS (Form 990, 990-EZ, 990-N, 990-PF and Form 1120-POL). 
• 2. Withhold and Pay Payroll Taxes
• 3. Keep Records
• -Financial Records (Money coming in and out, employment tax records & asset records)
• -Permanent Records
• -Minutes from Board Meetings
• -Copy of previous returns and attachments sent to the IRS from the the last three previous years. 
• 4. Give donors that make a donation of $250 or more a written acknowledgement. If your group is soliciting contributions from individuals, you should provide a written receipt and register and file them in your annual reports with the states. 

• 5. Serve the public - services and activities of a 501(c)(3) organization should be directed toward an exempt purpose and the overall betterment of the public. 

DONT’S: 

• 1. Fail to file for 3 consecutive years
• 2. Engage in Substantial Lobbying
• 3. Participate in political campaign activity
• -This includes campaign contributions, endorsements and public statements regarding candidates. 
• 4.Serve private interests
• -501(c)(3) organization activities should be directed toward an exempt purpose. 
• 5. Unrelated Business Income
• -Too much income received from activities not related to the purpose of the organization can become a threat for tax-exempt status to be removed.

By following these “do’s and don’ts” your organization can remain intact and effective. Losing tax-exempt status as a non-profit can strongly affect your organization in a negative way. If your organization does in fact get revoked at some point, there is still the opportunity available for you to be reinstated by the IRS. Although the law prohibits the IRS from undoing a proper automatic revocation, organizations can apply to have their exempt status reinstated. Reinstatement can happen four ways: 10 Streamlined retroactive reinstatement 2) Retroactive reinstatement process (within 15 months), 3) Retroactive reinstatement (after 15 months) and 4) Post-mark date reinstatement. 

Be sure to file those annual returns and stay in good standing with the IRS by quickly and securely e-filing with ExpressTaxExempt. As the number one authorized IRS tax e-file provider, ExpressTaxExempt offers simplified and easy-to-use versions of Form 990, 990-EZ, 990-PF, 990-N, and its newest form specifically designed for political organization returns, Form 1120-POL. So take a few minutes and file today to keep those taxes away! 

As always, feel free to contact our support team of e-file experts at 704.839.2321 for any questions or help with your e-filing experience. We’re here to assist you Monday through Friday from 9 a.m. to 6 p.m. EST or feel free to reach us 24/7 via email at support@ExpressTaxExempt.com.

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Lost Your Tax-Exempt Status? Here's How to Get it Back

Once you’ve gotten that coveted tax-exempt status for your nonprofit organization, it can be quite the job maintaining it. For some, it can even become a full-time job to ensure their organization remains tax-exempt, which is why it can be so devastating to learn that the IRS has revoked that status.

Losing Tax-Exempt Status
The most common reason organizations lose their tax-exempt status is failing to file a Form 990 return for three consecutive years. Of course, there are more insidious ways organizations can forfeit their status, but not filing for three years in a row can be indicative of these. And so organizations will automatically lose tax-exempt status, effective beginning the original due date of the third missed annual return.

When you lose tax-exempt status, the first thing the IRS will do is send a letter explaining the situation and how your organization is no longer exempt from federal income tax. Your organization will be added to the Automatic Revocation of Exemption List, which the IRS updates monthly.

During this time, your organization is no longer considered tax-exempt so normal federal income tax laws apply. Also during this time period, you’re no longer eligible to receive tax-deductible contributions however your donors can deduct contributions made before your organization is listed on the Automatic Revocation list. Keep in mind that there may also be separate repercussions with your state after your tax-exempt status is revoked.

If your organization is still operating while its tax-exempt status is revoked, you may also be required to file a federal income tax return and pay any applicable taxes with one of these forms:

• -Form 1120, US Corporation Income Tax Return, due the 15th day of the 3rd month following your tax year end date
• -Form 1041, US Income Tax Return for Estates and Trusts, due the 15th day of the 4th month following your tax year end date

And Getting it Back!
The most important thing to getting your tax-exempt status back is to act fast and thoroughly when going through the IRS’s reinstatement steps. It will really help here if you’ve been keeping detailed records of your organization’s revenue and expenses. So, first things first: to reinstate your tax-exempt status, you’re going to need to file another Form 1023 if applying under section 501(c)(3). If you’re applying under a different Code section, file Form 1024. Regardless of whether your organization was originally required to file one of these forms for tax-exempt status, you’ll need to file one again now.

You’ll also be required to pay the appropriate user fee the IRS will charge for your status reinstatement. The specifics of the amounts you owe will be explained in the letter the IRS sends to alert you of your status being revoked.

If needed, you can also petition for a retroactive reinstatement as part of your application. This is an important step to take if you believe your organization’s tax-exempt status being revoked was an error or unwarranted. If you don’t need retroactive reinstatement, pending your application’s approval, your organization’s new tax-exempt effective date will most likely be the date you submit Form 1023 or 1024 to the IRS.

Once you’ve been reinstated, it’s important to make every effort not to lose that status again! Be sure to file your 990 Form each year, keep meticulous records, and, of course, only use the benefits of your tax-exempt status for tax-exempt operations. And don’t forget that ExpressTaxExempt can help - like the Jackson 5, just call our name and we’ll be there!

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Not Ready for Form 990? Here’s What You Do

Alright, exempt and nonprofit organizations — it’s that time of year!

We’re only a few weeks away from the deadline to file your tax exempt information return as a 501(c)(3) organization!

That’s right, your deadline is May 16th! Not ready yet? Here’s what you need to do.

E-file with ExpressTaxExempt

The most important thing you can do is to take a deep breath! While the idea of taxes can be daunting to many, you don’t have to suffer through it this year.

Why is that? Well, because you’re e-filing with ExpressTaxExempt.

With ExpressTaxExempt, you are not only e-filing with the premier tax exempt filing service out there, you’re saving time that can be dedicated to whatever cause you champion.

Plus, we make e-filing your taxes as easy as turning on a computer, logging into the website, and answering the interview style prompts.

File Form 8868 for More Time

Still not ready? Don’t freak out! Just e-file Form 8868 and receive an automatic 3-month extension of time to file your tax exempt tax returns.

If you need more time to file your Form 990 returns, just know that the deadline is also the same, May 16th!

And just in case you need more time after the first 3 months, you can e-file for another 3 months after that. These will be non-automatic, though, so there needs to be a legitimate reason.

Ready for Form 990? Here's What You Do Instead!

Alright, for the few of you out there who have already finished e-filing (or you run on a fiscal year different than the calendar year), what should you do?

Maybe it’s time to plan and implement a fundraiser. PTA groups can start now to coincide with the end of the school year!

With all the free time, you can start an email, social media, or video marketing plan.

And if you have all your bases covered, maybe you can plan a personal vacation! The possibilities are endless.

So sign up for ExpressTaxExempt today and start your 990 return now! I mean, that way you have all your bases covered come May 16th.

If you have any questions, our team of e-filing experts can help! Give us a call at 704.839.2321 or an email at Support@ExpressTaxExempt.com.

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How to Start a Nonprofit: The Road to 501(C)(3)

It’s human nature to want to help your fellow man. And maybe you’ve been fostering an idea of how you can help, but don’t know what to do. There are a few ways to approach this. One way is to jump right in and do it, without much of a plan. Your other option is to treat the whole process like you’re starting a business.

So take your idea for a nonprofit or tax exempt organization, and ask yourself—what are my next steps? What is my plan?

Ask Yourself, Is This Necessary?

Your first step is to explore the necessity for your nonprofit. Is this organization idea unique enough to have legs? Are there existing organizations that already cover this need? Do people really need this charitable service? How are needs being overlooked? Would this be better as a business instead of a nonprofit? Once you’ve covered your bases, you can move forward.

Next, you want to create the logistics of your nonprofit. This includes a mission statement, a business plan, and your governing board. These will help you communicate your organization's mission, plan the details of this venture, and create the basic roles within your team. Structuring your organization will give your nonprofit credibility, limit liability, and create organized documentation and policies which will make your IRS filing easier.

Apply for Nonprofit Status With Form 1023

Next, you need to file Form 1023 to get 501(c)(3) nonprofit status.

There are a few key requirements for an organization to be exempt from federal income tax under section 501(c)(3):

• First, the nonprofit organization must be organized as a corporation, trust, or an unincorporated association, with its organization document defining the organization's purpose(s), and the organization must also permanently dedicate its assets to exempt purposes.
• It must also be operated to further one or more of the exempt purposes stated in its organization document.

Organizations that are eligible to file Form 1023 for recognition of exemption under section 501(c)(3) of the Internal Revenue Code range from churches to schools and even hospitals.

After that, you simply need to keep organized, perform your charitable duties, and stay compliant!

Staying Compliant With Form 990

How do you stay compliant? Well, ExpressTaxExempt is the simplest solution for e-filing Form 990, Form 990-EZ, and Form 990-N (the e-Postcard). With our bulk uploading feature, multi-user accessibility, and the ability to share your return for review, we have the most bang for your nonprofit’s buck.

How do you e-file your Form 990? Watch this!




If you run into any problems e-filing your 990 series return, our friendly customer support team is ready to answer your questions! You can reach them by phone at 704.839.2321, or by live chat on our site.

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Upcoming Deadline? File Extension Form 8868!

Alright, raise your hand if you’ve ever missed a deadline?

Yeah, that’s what I thought.

It happens to the best of us. And because we know it’s bound to happen, we suggest e-filing Form 8868 for a tax exempt extension. Maybe we’ve told you this before, but we figured it’s time for a little refresher.

What happens when you file Form 8868? If you’re a tax exempt organization and you file, you get an automatic 3 month addition to your filing deadline. Form 8868 deadlines are the same as Form 990 deadlines, which are the 15th day of the 5th month after the end of an organization’s financial year. For your first extension, you don’t have to provide a reason—which is why they call it automatic.

If you find that your organization still needs an extension after those three months, you can file for a second extension for another three months! The second extension is not automatic, and you may require an explanation. And of course, you can only file for the second extension if you filed for the first one (Part I).

Since the first extension is automatic, it makes sense to file for one if you’re unsure about the upcoming deadline in any way.

What are other ways you can prepare for a filing deadline? First, make sure your record keeping is spot on. We have plenty of tools to help with gifts and contributions, record keeping, and filing. Maybe you can create a checklist to maintain tax-exempt status going into a deadline that will streamline the whole process!

Top 5 Ways to Prepare for Your Tax Season

What if you miss the deadline and file late? If you're e-filing Form 990-N (the e-Postcard), there is no penalty. However, if you don't file a return for three consecutive years, your tax exempt status will be revoked. If an organization whose gross receipts are less than $1,000,000 for its tax year files its Form 990 after the due date (including any extensions), without a reasonable cause for filing late, the IRS imposes a penalty of $20 per day for each day the return is late. The penalty increases to $100 per day, up to a maximum of $50,000, for an organization whose gross receipts exceed $1,000,000.

Now, we know you have important work on your hands, so we try to make things as easy as we can around here. If you have any questions rolling into the next deadline, send us an email or a live chat and we’ll help you out. If you’re more of a phone person, you can reach us at 704.839.2321.

How does your organization prepare for upcoming deadlines?

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Non-Profit vs. Tax-Exempt Organizations

In the realm of tax and legal jargon, there’s a phrase you probably heard as many times as we have here in the office, “Non-profits are tax-exempt organizations, but not all tax-exempt organizations are nonprofits.”

“Tuh-mey-toh, Tuh-mah-toh,” right? Both are so similar; yet, there are significant differences that justify their separate designation.

Non-Profits
Your organization being labeled as a non-profit or for-profit is a perception of state law. According to state law, a for-profit organization generates money specifically for its owners and investors. By having your organization recognized as a non-profit, you’re basically stating your organization has some other purpose other than creating revenue for owners and investors. But that purpose alone doesn’t necessarily qualify for an exemption from taxes.

Tax-Exempt Organizations
As mentioned before, labeling your organization as a non-profit doesn’t mean it’s automatically recognized as “tax-exempt.” Above all, you must apply to the IRS for a determination of a tax-exempt status. There are many types of organizations that are qualified for a number of tax exemptions; one would be like an exemption from tax on income that is received during the course of activities conducted in relation to your organization’s tax-exempt purpose.

A 501(c)(3) organization is your most common type.of tax-exempt organization. In order to qualify, you have to file a Form 1023, Application for Recognition of Exemption Under Section 501(c)(3), with the IRS. Your state may also require you to submit an application with them to qualify for exemption from state income tax and other state taxes.

For more information about non-profits and tax-exempt organizations, check out the following blog: Becoming a Non-profit or Tax-Exempt Organization

One thing you should remember is that both non-profits and tax-exempt organizations can make money. Just because you’re labeled as either “non-profit” or “tax-exempt” doesn’t mean that your organization can’t have any money left over at the end of the year. Any funds not needed to fulfill a current expense can be used to further your organization’s mission or be saved for future activities.

If your organization is tax-exempt, or a non-profit that’s recognized as “tax-exempt,” you can safely and securely e-file your tax-exempt return with Express990. We offer all three 990 forms for tax-exempt organizations. You can also download our FREE Express990 App for iOS and Android tablets, or use our mobile site to e-file a Form 990-N (e-Postcard).

For any questions or assistance with our e-filing services, feel free to contact our live, expert help at our headquarters in Rock Hill, South Carolina.

Phone: (704) 839-2321 (Monday - Friday, 9am - 6pm, Eastern Standard Time)
Email: support@expresstaxexempt.com
Live Chat: www.expresstaxexempt.com

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Becoming a Nonprofit or Tax-Exempt Organization

You provide a local service, and your service fulfills an existing need, it attracts support, and produces substantial results. You’ve thought about it and want to take your services to the next level. An inspiring route to give back to your community while serving others is to start a nonprofit or a tax-exempt organization. 

You need to understand that building and maintaining a nonprofit could potentially take years of effort and an even greater amount of determination. However, there are general steps you can take in your journey to become a nonprofit or a tax-exempt organization.

First Step: Educate Yourself

Do Some Research. You need to figure out if there are any other nonprofit organizations that are currently providing the same type of service in your community. It may prove harder to find support if you’re just copying existing services rather than improving or adding to them.

Be familiar with how a need isn’t being met within demographic or population data that shows a need for your services.

Is A Nonprofit the Correct Path? As a possible Public Charity, you must organize and operate exclusively for exempt purposes that are in place with section 501(c)(3) of the Internal Revenue Code.

Know and Consider the Alternatives. You may find that building a nonprofit a complicated way just to pursue your passion to serve your community. Developing and maintaining reliable income streams will most likely be your greatest challenge. Statistics show that less than half of new nonprofits make it over five years, and those who do make it, at least a third of them are in financial stress.

Don’t let that discourage you. Consider other possibilities that can still let you operate as a nonprofit with less effort and cost. With that, you can refocus on serving your community and developing experience and support.

Second Step: Build a Sturdy Foundation

Create a Mission Statement. Presenting your mission statement is a critical step. It tells your organization’s purpose, what types of people you serve, and how you serve them. Every move you make with your organization should be to support and progress your mission.

Draft a Business Plan. By having a business plan, you can efficiently describe, in detail, your organization’s intention for achieving its mission. A business plan can also be used to outline new projects or ventures.

Develop Your Board. Your board will perform a variety of roles and legal responsibilities. It will also change as your organization grows in order to carry out duties effectively. Your recruitment will be most important, but also systematic board development like orientation, training, evaluation, and the cultivation of board members are crucial to overall success.

Third Step: Incorporate Your Nonprofit

Reasons you should incorporate:

• Formal structure adds credibility to your programs and services
• Corporate structure limits the liability of your organization's officers and directors
• Documents, policies, and procedures associated with corporations are required by the IRS

Fourth Step: File for 501(c)(3) Tax-Exempt Status

Eventually, you’ll need to apply for tax-exempt status with the IRS. There is a registration fee that depends on your average annual gross receipts. The decision from the IRS could also take up to a year to receive based on the information from your application.

Fifth Step: Continuous Compliance

Register with Your State’s Agency. Your state agency manages charitable organizations and solicitations. If you plan to get contributions from other states, you would need to register again within those states. Registration requirements may vary from state to state.

File Your Required Federal Returns. To receive tax-exempt status, you should act like a tax-exempt organization from the day of your incorporation. That means filing a Form 990 even if you’re a start-up, even if you had a short tax year, even if you brought in no revenue at all. Forms break down like this:

• Form 990 (Long Form) - For tax-exempt organizations with gross receipts greater than or equal to $200,000 and total assets greater than or equal to $500,000.
• Form 990-EZ - For tax-exempt organizations with gross receipts less than $200,000 and total assets less than $500,000.
• Form 990-N (e-Postcard) - For tax-exempt organizations with gross receipts less than $50,000.

These returns are due on 15th day of the 5th month after your tax end date and, if you fail to file for three consecutive years, you’ll automatically lose your tax-exempt status.

Each guideline may vary with each state so it’s recommended that you consult with a tax professional for detailed assistance. Stay in compliance with the IRS by e-filing your tax-exempt return with Express990. We support all three 990 forms for tax-exempt organizations, and we offer a safe, secure, and accurate e-filing process that will save you time and money.

For any assistance with e-filing our available 990 forms, you can contact our live professionals by phone (704-839-2321, Monday through Friday from 9am to 6pm, Eastern Standard Time), by email (support@expresstaxexempt.com), or by live chat (www.expresstaxexempt.com).

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How Does An Organization Receive 501(c)(3) Status?

The Express990 team has been.... you know the title of this blog is just one of those questions that you don't want to read through a lengthy introduction to finally come to the answers. I've also been pondering this question, so let's just get right to it shall we...

What forms need to be filed?

There are two main types of forms an organization can file to get exempt status: Forms 1023 and 1024. 

• Form 1023 is exclusively for 501(c)(3) organizations and comes in various fashions. Form 1023, the largest of the 1023 series, is 26 pages long and includes 8 different schedules. Because of the complexity and length of this form, the IRS decided to make smaller versions. The i1023 is an online interactive version of the 1023 that has auto-calculated fields and help buttons. This form is then downloaded, printed out, and mailed in. Form 1023-EZ is for 501(c)(3) organizations that will have gross receipts of less than $50,000 and total assets of less than $250,000. The 1023-EZ is only 3 pages long but still requires the same $400 filing fee that is consistent for all of the applications.

• Form 1024 is for all other organizations other than Section 501(c)(3). Most of these organizations can self-declare their tax-exempt status, but must still file a Form 990. If an organization of this type has its exempt status revoke, it must file a Form 1024 to be reinstated. The only exceptions are Sections 501(c)(9) and 501(c)(17) organizations, as these cannot self-declare. There are 11 schedules connected with the Form 1024, but only one schedule will be used with each type of organization filing.

What are the all the steps to receiving 501(c)(3) Status?

Filing for tax-exempt status can seem like a daunting task, but if you keep your ducks in a row, it won’t be nearly as stressful. First things first: do your homework. Make sure you have all the information and paperwork you need before submitting your organization to the IRS. You don’t want to have your application become stuck in limbo because you forgot one initial on one page. In the end, you don’t want your exempt status to come down to hope, trust, and pixie dust.

There are four forms that an organization can use to apply for exempt status: Forms 1023, i1023, 1023-EZ, and 1024. The first 3 are variations for just section 501(c)(3) status applications. Form 1024 is for all other section 501(c)s, though most organizations that fall into these sections can simply self-declare. Exceptions to this rule would be sections 501(c)(9) and 501(c)(17), which cannot self-declare.

The Form i1023 is an online version of the full Form 1023, which is 26 pages and 8 schedules long. The Form 1023-EZ, on the other hand, is only 3 pages long but is reserved for those 501(c)(3) organizations with under $50,000 in annual gross receipts and less than $250,000 in total assets. Both the 1023 and 1023-EZ require the same $400 filing and processing fee.

How does an organization maintain their exempt status?

One of the best ways to maintain your exempt status is to file your Form 990 return every year on the date specified by your fiscal calendar. The majority of organizations lose their exempt status simply because they did not file for more than three consecutive years.

For audit and record purposes, you want to keep a copy of every IRS document. Record retention is determined by the needs and wants of the organization. Many nonprofits, particularly those engaged in providing heath-care services or those serving minor children, are subject to retention requirements that are specific to, or prudent for, the services they provide. 

Overall, receiving 501(c)(3) Status doesn't seem too difficult. Decide which form you need to file, the 1023 or the 1024. Then enter in some business information pay a filing/processing fee, wait a non-specified amount of time (I'm hoping within a day-fingers crossed), and {poof} 501(c)(3) Status received. I'm happy to see an online version of the 1023 (known as the i1023), because paper filing is a bit old fashioned and time consuming. For more information on 501(c)(3) status check out these blogs:

What Can Cause Your Tax-Exempt Status To Be Revoke?

How To Reinstate Tax-Exempt Status

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