Many people think that because they are a non-profit, that automatically makes them tax exempt. Unfortunately, it doesn't. It is a process that takes patience for sure.
Non-profit refers to being incorporated at the state level. Tax-exemption is at the federal level.
First thing to do is
Incorporate - it doesn't matter how long your organization has been in existence; by incorporating, with the IRS, you become a new organization. If you incorporate as a non-profit and then become tax-exempt, you can follow up and become exempt from paying state-level income and sales tax as well.
Next, you will need to apply for an
EIN (Employer Identification Number). This will be assigned by the IRS and will identity your group/organization as a legal business entity. You will need this to open a bank account and also later when and if you apply for federal tax-exempt status.
www.irs.gov (
FORM: SS-4)
To be designated as a federally recognized tax-exempt organization, your group needs to pay a fee and file an application. The application is called -
Application for Recognition of Exemption (IRS Form 1023 or Form 1023-EZ). Make sure when you receive your determination letter from the IRS, put it somewhere safe. If approved, this letter declares your organization a federally recognized tax-exempt charity, so this is a very important document.
www.irs.gov
(FORM: 1023 or 1023-EZ)
The last step is to apply for State Tax Exemption. It is an application that you will need to complete utilizing all of the above information.
www.revenue.pa.gov
(FORM: State Tax Exemption)
If your group/organization has access to an accountant or attorney on your committee, you can ask them to donate their services by completing the forms for you. This will hopefully eliminate any additional time waiting on your approval. It's a lengthy process to begin with, so utilize your connections!
Getting to this point isn't quick or easy, but it is necessary if you want to operate a successful 501C3.
