The non-profit organizations obtain the 501c3 status in order to get advantages. The 501c3 status has been developed for charitable organizations of the United States. In this blog, we are going discuss the basics of the 501c3 status. We are also here to let you know about the 501c3 organizations, by mentioning the characteristics and the ways it operators. You will also get to know about the IRS. In the end of this blog, we will mention all the necessary steps to start a 501c3 organization.
Know the basics of the 501c3
501c3 is a section which is a portion of the Internal Revenue Code (IRC) of the United States that allows federal tax redemption for non-profit organizations. Especially, it is for those non-profit organizations that are considered public charities, private foundations or private operating foundations. It is administered and regulated by the U.S. Department of Treasury through the Internal Revenue Service (IRS).
Basically, in simple words, 501c3 is a status that non-profit organizations of the United States obtain for federal tax redemption.
There are other 501(c) organizations as well that are indicated by categories. In this blog, we are here to discuss only about the 501c3.
Know about 501c3 organizations
In simple words, non-profit organizations of the United States that has obtained the 501c3 status, is also called 501c3 organizations. These organizations are exempt from federal income tax. For that the non-profit organizations fulfills the requirements of the section 501c3.
Most of the organizations that are eligible for getting this status usually fall into the categories of charitable organizations, churches and religious organizations and private foundations.
In order to get considered a charitable organization by the IRS, a group must operate exclusively that matches with the purposes. These purposes should be:
Charitable
Religious
Educational
Scientific
Literary
Testing for public safety
Fostering national and international amateur sports competition
Preventing cruelty to children and animals
These non-profit organizations should not serve any private interest, including the interest of the creator, the creator’s family, shareholders of the organization, and other designated individuals. All the earnings should be solely dedicated and invested for the charitable cause.
Some unrelated business income is allowed for 501c3 organizations, the tax-exempt charity may not get substantial income from unrelated business operations. This means that majority of all the business operations should serve the main purpose of the non-profit organization.
What is IRS?
Internal Revenue Service is also known as IRS. It is a revenue service for the United States federal government. The service is responsible for collecting taxes. It is also responsible for administering the Internal Revenue Code.
In simple words, the Internal Revenue Service is an agency of the government of the United States. The agency is responsible for collecting taxes and enforcing tax laws. The IRS agency was established in 1862 and operates under the authority of the U.S. Department of the Treasury. Collecting income taxes of individuals and employment taxes are the main purposes. Non-profit organizations need to submit IRS form 1023 to seek tax redemption.
In 2020 it processed nearly 240 million tax returns. Tax returns were filed electronically and the percentage was more than 94% in 2020.
Steps to start a 501c3 organization
There are certain steps that you need to take to obtain the 501c3 status. So follow the necessary steps that are mentioned below:
Establish a non-profit organization.
Meet the eligibility criteria of 501c3 by adapting certain traits and characteristics of your non-profit organization to opt for 501c3.
Make sure to fit your non-profit organization to fit into a category that is accepted.
Understand the requirements of the IRS and go through the IRS application process.
Know about 501c3 paperwork & charity paperwork.
Apply to the Internal Revenue Service (IRS) for getting recognition for tax redemption.
Conclusion
So now you know everything about the subject matter, it is your time to take all the necessary steps to start your own 501c3 non-profit organization for the welfare of the society.
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