Your New York corporation may be organized as a nonprofit, but you will need to obtain tax exempt status from the IRS, usually classified under Section 501(c)(3) of the Internal Revenue Code to be treated as such by the IRS. Otherwise, your organization will be subject to federal income tax on any earnings or income, just like a regular for-profit business. In addition:
- Donors to your organization will not be able to claim a tax deduction for their contributions, as they would for donations to 501(c)(3) organizations.
- Your organization will still benefit from limited liability protection for its officers and directors, assuming all legal requirements are met.
- There may be reporting obligations to the state of New York, such as filing the CHAR500 form and any other required state-specific filings.
If you wish to obtain tax-exempt status and the benefits associated with being a 501(c)(3) you will need to apply to the IRS by filing Form 1023 or 1023-EZ, depending on your eligibility. The process involves demonstrating that your activities and purpose align with the criteria set by the IRS for tax-exempt organizations. Once granted your organization is exempt from paying federal income tax on their qualifying activities, allowing more resources to be directed towards your mission.
It’s important to note that obtaining and maintaining 501(c)(3) status involves complying with IRS regulations and fulfilling specific requirements related to the organization’s activities and structure.
- Most 501(c)(3) organizations are required to file an annual information return with the IRS, known as Form 990, 990-EZ, or 990-N (e-Postcard), depending on their financial activity.
- Organizations with annual revenue and support between $250,000 and $750,000 require reviewed financial statements to be included with the IRS filing. If these exceed $750,000, the financial statements must be audited.
- Form 990 Schedule A is required for organizations with gross receipts normally exceeding $50,000. It provides additional information about the organization’s activities and its public charity status.
- If a 501(c)(3) organization generates unrelated business income (UBI) of $1,000 or more, it must file Form 990-T to report and pay taxes on that income.
- CHAR500 is an annual filing required for nonprofits registered with the New York State Attorney General’s Charities Bureau. The CHAR500 form provides financial information and other details about the organization’s operations.
- Certain nonprofit organizations may also be required to submit a CHAR410 form, which is a financial report for organizations with total annual revenue over $250,000.
It’s important to consult a tax professional to understand the implications and requirements specific to your organization’s situation and goals. Please note that filing requirements and regulations may change over time, and it’s essential to verify the most up-to-date requirements with the respective federal and state agencies or consult legal and tax professionals for accurate guidance.