How to Start a Non-profit – Step 3: Filing for Tax-Exempt Status – Part 2

Last fall, we’re created blogs focused on various resources charities might need. This blog is part of a series focused on becoming a registered 501(c)(3) nonprofit organization from a Zealous Good team member who has done it before! Stay tuned throughout the next few months for direction on Registering for an EIN, Filing for Tax-Exempt Status, and little bits of advice!

Step #3: Filing for Tax Exempt Status (501(c)(3)): Part 2

Note: This is a continuation of the previous post on becoming a nonprofit: filing for tax exempt status.

Section 7: Your History: The IRS just wants to know if you took over the activities of another organization or if you were a previous organization/corporation.  If you took over more than 25% assets of a preexisting NPO, you need to disclose it here.

Section 8: Your Specific Activities: You must list your fundraising activities, including the time spent on each, here.  This includes other organizations raising money for your organization.

  • Your organization can not be involved with supporting or opposing a candidate in a political campaign.
  • If you are using any type of gambling to raise funds (from casino nights to BINGO events) be sure to do a little research as far as what is allowed with a tax-exempt status.
  • If you will have any operations in foreign countries, they will also be listed here.  You should review the Office of Foreign Assets Control (OFAC) Specially Designated Nationals List (SDN) to ensure you do not give money to anyone on the list.  This can be found here.

Section 9: Financials:  This is one section your lawyer likely will need a lot of your help or the help of your accountant.  It starts with a pretty simple, itemized statement of revenues, but it will take a little sifting through your records to answer some of them.  The second part is a Balance Sheet from the most recent tax year, which hopefully you will have already prepared previously.

  • Don’t forget that donated items still count as donations.  You need to include the cash value of any donations.
  • The IRS requires you submit your financial data for the most recent five years.  This form has slots for the current year and the last three years. I don’t know why they haven’t modified the form. We had to submit two more years of data after our initial review, and had to wait longer to get our status.

Section 10: Public Charity Status: This section is different depending on if you are a public charity or a private foundation.  

Secton 11: User Fees: This one’s an easy one – just tell them what your average annual gross receipts are, and it will tell you how much you need to pay them.

And finally, here is a checklist to make sure you have everything you need before sending it over: http://www.stayexempt.irs.gov/checklist.pdf

Now, you play the waiting game! We waited over a year for our status to be approved.  You can see where the IRS is in approving status here: http://www.irs.gov/Charities-&-Non-Profits/Where-Is-My-Exemption-Application

  • I suggest writing a compelling letter to your congressman asking for assistance in expediting your application.
  • There is a chance the IRS will request more information. Don’t be discouraged – they usually respond very quickly once your application has had its initial review. However, you will always have a week or two deadline to submit the information they request. DO NOT WAIT. They will throw out your application if they do not receive the requested information postmarked by the deadline.

You’re now one step closer to becoming a nonprofit, and even better, one step closer to becoming an eligible Zealous Good nonprofit member!  Meanwhile, as you’re organizing things for that new office, don’t forget to donate those unneeded items to Zealous Good!

Michelle Retson is a Community Engagement Manager at Zealous Good, an in-kind donations marketplace in Chicago. Her family founded the nonprofit, Healing, Health, & Hope. You can find Michelle on Google+, or Zealous Good on Facebook and on Twitter at @ZealousGood.

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