About IRS Publication 557: Tax-Exempt Status for Your Organization

KEY TAKEAWAYS

• Guidelines for tax-exempt status are described in IRS Publication 557.
• IRS Publication 557 walks taxpayers through the necessary paperwork. It includes the appeals procedure in the event that tax-exempt status gets denied, as well as the possible grounds for revocation.
• The publication offers a reference chart that lists the Internal Revenue Code provisions. These apply to a tax-exempt organization that meets the requirements. And the documents required to make an application.

What Is IRS Publication 557?

Publication 557 provides information on how to apply for the tax-exempt status for your organization. It is important to read this publication carefully. This helps ensure your organization meets all the requirements for tax-exempt status.

There are many benefits to obtaining tax-exempt status for your organization:

1. Your organization will not have to pay income taxes. This provides significant savings, especially for larger organizations. 
2. Donors may be able to deduct their donations on their income taxes. This can encourage more people to donate to your organization, which can help you grow. 
3. Tax-exempt status can make your business more attractive to potential donors.

Many organizations only want to work with other organizations that have this status. So obtaining it can open up new opportunities for your organization. Publication 557 contains detailed information on the requirements and process for obtaining this status.

Carefully review the publication and make sure that your organization meets the requirements. You should do this before beginning the application process.

What Is Tax-Exempt Status for an Organization?

There are many benefits to having tax-exempt status for your organization. Tax-exempt status means that your organization does not have to pay taxes on its income, which can save your organization a lot of money. 

Tax-exempt status also allows your organization to accept donations from individuals and businesses. These donations can be used to help fund your organization’s activities. Tax-exempt status can also help your organization build credibility with the public, as people may be more likely to trust your business and support your organization if it receives tax-exempt status.

This status can also help you to apply for grants and funding that are only available to tax-exempt organizations. You can also use it to reduce your liability in case of a lawsuit. Tax-exempt status is a valuable asset for any organization, and it is well worth the effort to get it.

What Are the Filing Requirements for IRS Publication 557?

IRS Publication 557, Tax-Exempt Status for Your Organization, lays out certain filing requirements. This is for organizations seeking tax-exempt status. 

To qualify for tax-exempt status, your organization must be organized for the purposes specified by the tax code. Some of the organization purposes are: 

• Charitable
• Religious
• Educational
• Scientific
• Literary
• Testing for public safety
• Fostering national or international amateur sports competition
• Preventing cruelty to children or animals. 

To apply for tax-exempt status, an organization must file an application with the Internal Revenue Service (IRS). Besides providing the organizations information like employer ID number and description of activities, the application must include the organization’s articles of incorporation or organization. Some organizations must also include their bylaws or other governing documents. 

The IRS will also need financial information, like a statement of income and expenses and a balance sheet. Once the IRS has reviewed the application, it will issue a determination letter that will state whether the organization qualifies for tax-exempt status. If you receive tax-exempt status, you are exempt from federal income tax on your earnings. 

Having an exempt status may also make the organization eligible for other benefits, such as exemption from state sales and property tax. Additionally, donors to tax-exempt organizations may be eligible for federal income tax deductions. 

How to Get Tax-Exempt Status

To get tax-exempt status, you’ll need to apply to the IRS. The first step is to choose the right form. There are two main forms you can use to apply for tax-exempt status: Form 1023 and Form 1024. 

• Form 1023 is for organizations that get organized as nonprofits under state law. 
• Form 1024 is for organizations that get organized as trusts or cooperatives. Once you’ve chosen the right form, you’ll need to gather some information. 

You’ll need to provide financial information, a description of your organization’s activities, and more. After you’ve gathered all the necessary information, you can fill out the form. If you need help, the IRS website has instructions on how to fill out each section of the form. Once you’ve completed it, you’ll need to submit it with the required documentation. Keep in mind that the entire process can take several months.

Summary

IRS Publication 557 is a great resource, especially for those looking to learn about tax-exempt status for their organization. The publication provides detailed information on the requirements and process for obtaining tax-exempt status, and tax-exempt organizations.

Written by Sandra Habiger, CPA

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

Written by Sandra Habiger, CPA

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.