If you’re considering starting a charitable organization, it’s important to understand the tax designation known as 501c3. The Internal Revenue Service applies this designation to non-profit organizations so long as they meet certain requirements. With a 501c3, your organization will be exempt from paying federal income tax.
To qualify for 501c3 status, your organization must be for one of the following purposes:
* Religious
* Charitable (such as an organization that supports the poor)
* Scientific
* Public Safety
* Literary
* Prevention of Cruelty
* Fostering Amateur Sports Competition
* Educational
If your organization qualifies for 501c3 status, you must apply to the IRS to obtain this designation officially. Once you’ve received your official designation, you are exempt from paying federal taxes, but not from filing the proper IRS forms each year. The forms you’ll need to file depend upon your gross receipts for the year. Generally, if these are less than $50,000, you will need to file a Form 990-N each year. If gross receipts are higher, you may need to file different or additional forms.
Additionally, you may be required to file other forms with the IRS, depending upon the value of goods that are donated to you, or the value of goods you may dispose of as a non-profit. In addition, you may be subject to tax on unrelated business income. It is critical that you understand exactly what forms you must file and what monies you might be taxed on to ensure compliance with the IRS. State tax laws can differ, so it’s important to understand your tax designation for your 501c3 in Minnesota.
Working with an attorney who specializes in non-profit law can help you obtain your 501c3 status in Minnesota and help ensure you file all the proper IRS forms. These attorneys offer reasonable fees to ensure non-profit organizations can keep overhead low so that the maximum dollar amount goes to the intended cause.
