Participating in political campaigns at any level.

Activities that should be avoided include: The first reviews details about the organization’s mission and volunteer base, the second summarizes revenues, the third summarizes expenses and the fourth summarizes net assets.Īside from filing the annual tax forms, the organization should avoid engaging in activities that could jeopardize the tax-exempt status. IRS Form 990 has four parts to the summary section. This is done with Form 990 and any subsequent schedules accompanying the form. The primary thing that an organization needs to do to maintain its 501(c)(3) nonprofit status is to do the annual filing.

But if the IRS, in reviewing the annual tax filing, feels that the status is just a tax shelter for a profit organization paying inflated salaries, it could revoke the status. While the IRS says that 501(c)(3) nonprofit organizations can pay employees a “reasonable salary,” it doesn’t give a definitive set of parameters. Where the scrutiny comes is how much of the incoming revenues is paid toward fulfilling the mission of the organization.

The nonprofit can hire people and pay them a salary and benefits from revenues generated. A board of directors is elected to oversee the company’s operations. For example, with a corporation, you’ll have articles of incorporation with bylaws that dictate how you run your organization. It’s important to remember that the nonprofit is fundamentally a corporation, trust, LLC or unincorporated association and must follow the organizational rules of the underlying business entity. The main difference is that the financial data of a 501(c)(3) is subject to public review, whereas a private organization is able to maintain its books without this type of potential scrutiny. How a 501(c)(3) Nonprofit WorksĪ 501(c)(3) works like most other C corporations. You must still file Form 990 with the IRS to account for the income that comes into the organization. It does not exempt the organization from filing tax returns. The 501(c)(3) status means that the corporation is exempt from paying federal taxes on revenues and income generated in the organization. Here’s what you need to know about the 501(c)(3) application process, including instructions on how to complete the necessary forms. While there are services that will do this for you for an inflated fee, there is only a $600 fee when filing the application directly to the IRS. To get the 501(c)(3) status, a corporation must file for a Recognition of Exemption. A 501(c)(3) is a corporation that receives tax-exempt status from the Internal Revenue Service (IRS).

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