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Sort by Relevance Most Recent. Federal Filing Requirements for Nonprofits. Printer-friendly version Most charitable nonprofits that are recognized as tax-exempt have an obligation to file an annual information return with the IRS. If your nonprofit has never filed, call the IRS Exempt Organizations Hotline at and ask that an account be established for the organization to allow filing of the e-Postcard.
Exceptions to this filing requirement include: Organizations that are included in a group return, Churches, their integrated auxiliaries, and conventions or associations of churches, and Organizations required to file a different return Background IRS information returns are known as the " series " because there are several forms that use the number , including Form , Form EZ , and for the smallest nonprofits, Form N.
Since tax-exempt organizations have also been required to annually report their unrelated business income. Which form to file? Information on electronic filing. Under state and federal tax laws, however, as long as a nonprofit corporation is organized and operated for a recognized nonprofit purpose and has secured the proper tax exemptions , it can take in more money than it spends to conduct its activities.
In other words, your nonprofit can make a profit. Whether or not a nonprofit's income is taxable depends on whether the activities are related to the nonprofit's purpose. Tax-exempt nonprofits often make money as a result of their activities and use it to cover expenses. In fact, this income can be essential to an organization's survival. As long as a nonprofit's activities are associated with the nonprofit's purpose, any profit made from them isn't taxable as "income.
Let's take as an example a group called Friends of the Library, Inc. It's a c 3 nonprofit which means it has a federal tax exemption , organized to encourage the appreciation of literature and to raise money for the support and improvement of the local public library. It makes a profit from a lecture series featuring famous authors and from an annual volunteer-run sale of donated books. Because these activities are educational and literary in nature, they do not jeopardize the group's tax-exempt status, and the proceeds from them are not taxable.
The organization may use this income for its own operating expenses including salaries for officers and staff or for the benefit of the local library. What it cannot do is distribute any of the income to the nonprofit's officers, directors, or others connected with Friends of the Library. Sometimes nonprofits make money in ways that aren't related to their nonprofit purposes. While nonprofits can usually earn unrelated business income without jeopardizing their nonprofit status, they have to pay corporate income taxes on it, under both state and federal corporate tax rules.
Let's go back to the Friends of the Library nonprofit corporation for an example of unrelated income. People donate many thousands of books to Friends of the Library for an annual book sale, one of its major fund raising events. Although the sale is always successful, let's say that one year thousands of books are left over, and the group decides to sell the more valuable of these books by advertising in sources for rare and out-of-print books.
Non-profit status may make an organization eligible for certain benefits, such as state sales, property, and income tax exemptions; however, this corporate status does not automatically grant exemption from federal income tax. To be tax exempt, most organizations must apply for recognition of exemption from the Internal Revenue Service to obtain a ruling or determination letter recognizing tax exemption. If you intend to apply to the IRS for recognition of federal tax-exempt status as a charitable organization under section c 3 of the Internal Revenue Code, your articles of incorporation must contain certain provisions.
For more information, see Required Provisions for Organizing Documents.
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