Critter,

Thank you for helping to clarify a very complex area.

It is not my area of expertise, but I do want to make sure I have the correct understanding.

Once an organization gets an EIN (and so long as they are active and raising funds), doesn't the IRS require tax forms be filed each year? This as assuming that 501c3 hasn't been applied for yet. Stated another way, a PTO should have their own EIN. If all a PTO has is an EIN, they will be required to file Federal (and probably State) tax forms as a business. Is this correct?

Once a PTO gets Non-Profit under 501c3, they file a version of Form 990 - you correctly noted these are technically not "tax forms" but they are annual filings to the IRS. My understanding is that if less than $5000 was raised, no financial infomation needs to be included on 990EZ - just the "who you are" info lets the IRS know you didn't forget to file.

If a 501C3 raises less than $100K and has less that $250K is assets they can file 990EZ.

More than that (we should all be so lucky!) requires the full Form 990.

Right you are, Critter. Thanks. I was thinking of the federal nonprofit status. It's that -- not the EIN number (that any old Tom, Dick or Harry can get) -- that can often make the state taxe exempt status easier to get.

Tim

Tim, I know you understand this stuff, but I want to clarify your comment for the sake of those who are learning the whole EIN/501c3 process for the first time.

With respect to your response to CBrooks' quote, you suggested that having an EIN will make it easier to get non-profit status. Not exactly. Having an EIN is just the very first step to earning your federal non-profit status. It won't make it any easier, since you can't even apply for non-profit status at the federal level (that is, 501c3) unless you have an EIN first. I think you meant to say that earning your federal 501c3 status might make it easier to be recognized as a non-profit organization at your state's level. In our state, for example, as long as you have your 501c3, your group is automatically exempt from state sales tax. (notice that we tend to interchange the labels "non-profit" and "tax-exempt" though there are some technical differences). It's a subtle clarification to your point, Tim, but important for those who are educating themselves through this forum.

Many people, (and some vendors included) make the erroneous assumption that a group is an official non-profit or tax-exempt simply because the group has its own EIN. Like I said, that's only the first step. The EIN is only your group's federal identification number. You need one to open a bank account for your group, for example.

Once you have an EIN, you are required to file tax forms each year.

I don't necessarily agree. Sure, getting an EIN makes your group known to the IRS, but it doesn't necessarily require your group to file federal tax forms. You have to meet an annual income threshhold before you should be filing the tax return, called the 990/990EZ. And, no, there aren't any taxes to actuallty pay; it's just easier to call it a tax form.

Gettting back to your original post, CBrooks, it sounds like your fundraising rep just wants a number to justify why they're not charging your group sales tax. I'm not in Kentucky, and the rules vary from state to state, but sales tax exemption is a state issue, not a federal issue. Maybe in KY, you can be granted exemption from state sales tax before you earn your federal 501c3 status. Or maybe the rep is trying to keep things simple and gray.

This is a long response to a short question. I hope it's not confusing you more!

C Brooks one thing to keep in mind is that if your group wants to incorporate do it BEFORE the 501c filing, it will save you alot of money and time.

Glad I can help.

I think from a Federal view, once the IRS says you are Non-Profit, you are exempt from Federal taxes.

Getting the Federal Non-Profit status is necessary to get similar recognition from your state and tax-exempt from the State.

EIN is a federal identifier that says your organization is "in business". You need it first because it is on the application for Non-Profit, but other than that it doesn't play into the IRS (or State) decision of qualifications.

Originally posted by C. Brooks:


We do have an EIN. Will this make it easier for us to get our nonprofit status?

Very often, yes. In fact, in some states the 501c3 approval is all you need to get state-level tax-exempt approval, as well.

Other states have a few more hoops to jump through.

Tim