Non Profit Or Tax Exempt Organization

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A non-profit organization is a legally constituted organization whose objective is to support or engage in activities of public or private interest without any commercial or monetary profit. In USA, non-profit organizations are normally formed by incorporating in the state in which they expect to do business. The act of incorporating creates a legal entity enabling the organization to be treated as a corporation under law and to enter into business dealings, form contracts, and property as any other individual or for-profit corporation may do.

After a recognized type of legal entity has been formed at the state level, it is customary for the non-profit organization to seek tax exempt status with respect to its income tax obligations. That is typically done by applying to the Internal Revenue Service (IRS), although statutory exemptions exist for limited types of non-profit organizations. The IRS, after reviewing the application to ensure the organization meets the conditions to be recognized as a tax exempt organization (such as the purpose, limitations on spending, and internal safeguards for a charity), may issue an authorization letter to the nonprofit granting it tax exempt status for income tax payment, filing, and deductibility purposes. The exemption does not apply to other Federal taxes such as employment tax. Additionally, a tax-exempt organization must pay federal tax on income that is unrelated to their exempt purpose. Failure to maintain operations in conformity to the laws may result in an organization losing its tax exempt status.

Individual states and localities offer non-profits exemptions from other taxes such as sales tax or property tax. Federal tax-exempt status does not guarantee exemption from state and local taxes. These exemptions generally have separate application processes and their requirements may differ from the IRS requirements. Furthermore, even a tax exempt organization may be required to file annual financial reports (IRS Form 990) at the state and federal level.

At TCF, we provide guidance and advice on incorporation of non-profit organizations. We have undertaken registration of various non-profit organizations and have got the 501(c)(3) status. Preparation of tax returns for tax-exempt organization requires different forms and disclosures. We undertake the following functions as well:

  • To get tax exempt status, non-profit organization must get approval from the IRS. TCF can take care of getting tax exempt status under IRC 501(c)(3).
  • A non-profit organization is subject to various reporting requirements at Federal and State level. We undertake these on behalf of our clients.
  • A non-profit firm has to comply with Tax and Law rules for maintaining its status as non-profit. We help our client maintain their status.
  • A non-profit firm works on budget as requires accurate accounting and maintaining control. We help our clients set up a budget and maintain control. We also help them develop accounting policies and procedures, analyze unrelated business income