Tips to help organizations understand the tax-exempt application process

IRS Tax Tip 2019-92, July 15, 2019

Organizations that want to apply for tax-exempt status under Section 501(c)(3) of the tax code use a Form 1023-series application. Here are some things organizations should know to help them understand the process:

  • The application must be complete. It must also include the user fee.
     
  • The application process on IRS.gov includes a step-by-step review of what an organization needs to know and what to do in order to apply for tax-exempt status.
     
  • There are a few types of organizations that do not need to apply for 501(c)(3) status to be tax-exempt. These are churches and their integrated auxiliaries, and also public charities whose annual gross receipts are normally less than $5,000.
     
  • An employer identification number is an organization's account number with the IRS and is required for the organization to apply for tax exempt status. Every tax-exempt organization, including a church, should have an EIN regardless of whether the organization has employees. After getting an EIN, the organization must include it on the application. Organizations may get an EIN by calling 800-829-4933 or by applying online.
     
  • Generally, an organization that is required to apply for recognition of exemption must notify the IRS within 27 months from the date it was formed.
     
  • When the IRS determines an organization qualifies for exemption under Section 501(c)(3), it will also be classified as a foundation, unless the organization meets the requirements to be treated as a public charity.
     
  •  A charitable organization must make certain documents available to the public. These include its approved application for recognition of exemption with all supporting documents and its last three annual information returns. 
     
  • The organization must provide copies of these documents upon request. The organization may charge a reasonable fee for reproduction and copying costs. Organizations that fail to comply may face penalties.

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