Charities applying for tax exempt status need to take these three steps, prior to making the decision, or the result could be an incorrect classification and cause tax problems with their tax filings, which would include penalties and possible having to refile a large number of tax returns. We have dealt with all kinds of companies, of all sizes, that incorrectly classified themselves, and the result was exactly that. Having to go back, re-classify, then refile tax returns, and the result always ends up having to pay penalties and the interest that goes with those penalties. If you don’t want to hire a tax resolution company, don’t make this simple mistake.
Charitable organizations must first determine whether it is a trust, corporation or an association. Then they have three more steps. First off they have to gather the organizational documents for the company. These are crucial and must include the organization’s organizing documents. Those include the Articles of Incorporation for a Corporation for a Corporation, Articles of Organization for an LLC, Articles of Association for an association, and Trust Agreement for a trust. Charities applying for tax exempt status must do this to avoid tax issues down the road.
Organization’s that do not have an organizing document will not qualify for tax exempt status. If the organization’s name has been legally changed by an amendment to its organizing documents, they should also attach an exact copy of that amendment to the application. State law generally determines whether an organization is properly created and establishes the requirements for organizing documents. Charities applying for tax exempt status must meet these requirements of each state to be considered tax exempt.
Charities applying for tax exempt status must also get an employer ID number for the new organization. Organizations can apply for the EIN online, by fax, or by mail for tax exempt organization. They can find things including tax information, registration requirements for charities, and information for employees. Third parties can receive an EIN on a client’s behalf by completing the Third Party Designee Section on the bottom of page 1. The third party must remember to get the client’s signature on the form.