Question: In PA - proper steps to be tax-exempt

PTO in PA - I'm so confused. Incorporate, tax-exempt, state level, federal level, 1023 form, 990 form - what needs done legally??"

Asked by alh325

Answers:

Advice from PTO Today

Rose H writes:

Hi there!
It can all feel very overwhelming!

So, to start out: If you go to this link, it will explain that in the state of PA you do have to register as a nonprofit group. https://ballotpedia.org/Nonprofit_regulation_in_Pennsylvania

Now, on the federal level. First, you want to get an Employer Identification Number, or EIN, from the IRS. The process for applying for this is fairly simple. You need this number to "exist" if you will in the eyes of the IRS. You also need that number to open a bank account.

Here's how you get an EIN: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

Once you have an EIN, you can move forward to apply for a 501(c)(3). This is a federal designation that says you are a charitable organization.

If your group brings in less than $50,000 in total gross receipts (all the money you bring in from fundraisers, donations, etc.) you can apply online with the IRS. You will fill out what's called a 1023-EZ online and the application fee is $275.

If your group makes more than $50,000, you need to apply the old fashioned way using a 1023 application. The fee structure changes with this. You pay $400 if you make less than $10,000 in total gross receipts or $850 if you make above that cut off.

Here's information on the 1023-EZ: https://www.irs.gov/uac/about-form-1023ez

And the 1023: https://www.irs.gov/uac/about-form-1023

Also, we should note that if your group brings in less than $5,000 a year it isn't required to go through this process.

Once you are functioning as a 501(c)(3), you will need to file tax statements with the IRS to show what your basic accounting has been for the year. That's where the Form 990 and 990-EZ (and 990- N, an electronic postcard) come in.

Here's where you go to get more information on these forms: https://www.irs.gov/charities-non-profits/annual-electronic-filing-requirement-for-small-exempt-organizations-form-990-n-e-postcard.

Happy to help if you have other questions!
Rose