501c3 is a tax exempt status the Internal Revenue Service grants to specific kinds of non-profit organizations. The rules for receiving this tax exempt status define exactly what an organization must do to be recognized by the IRS as a 501c3 non-profit organization and not liable for income tax.
Only one of the twenty-nine types of tax exempt classifications listed under section 501c of the United States Internal Revenue Code, it is commonly used by organizations operating exclusively for a cause and supported by public donations. To obtain IRS recognition, qualifying organizations must file IRS form 1023 and pay a fee. The fee for entities with $10,000 and higher yearly income is $850. For organizations earning less than $10,000 per year, the fee is reduced to $400.
Types of 501c3 organizations:
Your first step in applying for 501c status is determining if your organization is eligible and for which recognition classification is right for your non-profit. Get a copy of IRS publication 557, Tax Exempt Status For Your Organization and publication 4220, Applying for 501(c)(3) Tax-Exempt Status. Both provide guidance and useful information to help your organization apply for tax exempt status.
The next step involves the legal form an organization needs to qualify for recognition. To be recognized for tax-exempt status, an entity must be legally organized as a trust, corporation or an association. Talk to an attorney to get your non-profit set up correctly under the law.
The next step is applying for a Federal Employer Identification Number. This is necessary even if your organization has no employees because it is how the IRS will identify your organization. File form SS-4 with the IRS to apply for your EIN. You can download it from www.irs.gov or pick one up at your local Social Security Administration Office.
The final step in applying for recognition as a 501c3 non-profit is to file IRS form 1023 and pay the appropriate user fee. Carefully read and answer all the questions on form 1023. When that’s done, sign and date, enclose your check for the user fee and mail to the IRS address on the form. You should receive a determination letter or a request for more information within 90 days.