Tag Archive for 501(c)(3)

Mistakes Religious Organizations Make When Filing a Tax Return

John Stancil

When it comes to the IRS and religious organizations, these organizations fall into two categories – churches and other religious organizations. Due to the First Amendment, the IRS is extremely reluctant to tread in the area of church organizations. This is not to say that churches have carte blanche to ignore the tax laws, but that the IRS grants them a great deal of leeway in regulating them. All religious organizations are subject to the law in regard to taxation. However, many operate as if the laws do not apply to them. Some of the most common mistakes made by religious organizations are the subject of this article.

At the outset, it should be noted that churches do not have to apply for 501(c)(3) status. They may choose to do so, and there are some very good reasons that they might wish to make such an application. All other religious organizations must apply for this status by completing and filing Form 1023 or Form 1023EZ. A church is automatically treated as though it has 501(c)(3) status.

Filing a return. Churches do not have to file a Form 990. However, some churches file these returns. This is unnecessary and may cause the IRS to take a closer look at the organization. If you don’t have to file, don’t file. Read more

How To Lose Your Tax-Exempt Status

A cartoon illustration of a priest looking confused.

Many people, particularly those involved in 501(c)(3) tax-exempt charitable organizations, are familiar with the process of applying to the IRS in order to receive tax-exempt status. Organizations that have obtained this status can accept tax-deductible contributions from donors. Obviously, this is critical to such organizations.

Tax-exempt status should not be taken for granted. When obtained, it is for an indefinite period. However, an organization can lose its tax exempt status, either by voluntarily surrendering it or having it revoked by the IRS. If revoked by the IRS, it may be retroactive if the church or organization omitted or misstated material facts or operated in a manner significantly different than originally represented. More frequently, however, the revocation will be effective no earlier than the date on which the organization received written notice Read more

What Is A Private Foundation?

Paper Family in Hands over Green Sunny Background. Family and Kids Concept

Most people have heard the term “private foundation,” and know vaguely that it somehow relates to philanthropic organizations.  But beyond that, most people are lost when pressed for more details about these organizations. A 501(c)(3) tax-exempt organization is either a public charity or a private foundation. The default is that an organization will be classified as a private foundation unless it can demonstrate that it falls into one of the categories specifically excluded from the definition of a private foundation. These rules are found in section 509(a). Generally, it is to the advantage of the organization to be classified as a public charity as there are fewer restrictions on the operations of the organization under this category.

A private foundation is typically a legal entity set up by an individual, a family, or a group of Read more