- 1. When can we start giving tax-deductible receipts?
- If you are a new organization just now filing your Articles of Incorporation, your tax-exempt status will be retroactive to the date of the filing of your Articles. For these organizations, you can begin giving tax-deductible receipts for donations you receive as soon as your Articles are filed as long as the donor understands that if for any reason you do not obtain tax-exempt status, the tax-deductible receipts are invalid, and the donations can be disallowed by the IRS. If you have already filed your Articles of Incorporation (Plan B), tax-exempt status may not be retroactive to the date of the filing of your Articles: if more than 27 months have passed since the filing of your Articles, tax-exempt status may only be retroactive to the date of the filing of the Form 1023 501(c)(3) application with the IRS. Click here for more extensive information from the IRS on this subject.
- 2. What about directors? How many do we need? How do we select them?
- Directors have 100% control of the corporation. It is very important that you have trustworthy directors. The IRS requires a minimum of three. You can have as many as thirty. We recommend an odd number to avoid a deadlock in voting. If you want more than thirty directors, you can amend your Bylaws once you have obtained tax-exempt status.
- The directors vote for the officers (president, vice-president, secretary and treasurer) and can normally change them at any time (absent a contract to the contrary). Here's a brief story to keep in mind: A man operated a nonprofit organization for 16 years. He, his wife, and a third director comprised the board of directors. When his wife divorced him, she joined up with the third director, and they removed him from his organization. After 16 years of sweat and toil in his own nonprofit, he was out in the street. Choose your directors wisely.
- 3. Do the directors and officers have to live in my state? Be U.S. citizens?
- No, they can live anywhere in the U.S. or reside abroad. They can be U.S. citizens or foreign nationals. Normally, your treasurer must be a U.S. citizen or a legal U.S. resident, and the accounting records for the organization must be kept in the U.S. If the organization has no U.S. presence, it may still obtain tax-exempt status (e.g., to get grants), but donations to it would not normally be tax-deductible.
- 4. How long does the process take?
- Once we get a questionnaire back from you, it takes about a week to prepare your documents. We guarantee to send you your documents within five business days or we pay you $200. States take varying amounts of time to file the Articles of Incorporation. After your application is sent to the IRS, it may be 2 months, 3 months or up to 8, 9, or 10 months before you receive your tax-exempt status (and sometimes even longer, especially if the IRS needs additional information from you in order to make its determination, but this is the exception). The IRS is very backlogged currently. See our information from the IRS about how long it takes.
- 5. Will your fees and state and federal filing fees be tax-deductible?
- Yes, they will be tax-deductible if you follow our procedure. We provide you a legal document to accomplish this. Just make a mental note that you intend to be repaid by the organization for the fees you pay.
- 6. What does your service NOT cover?
- Other than your corporate documents (Articles, Bylaws, etc.), we do not handle anything on the state level. State, county and city laws and regulations vary state by state, county by county and city by city. Normally, you should be able to handle them on your own. Likewise for state tax-exempt status (automatic or almost automatic for most states) Click here to see what your state requires for state tax-exempt status.
- 7. What do your Questionnaires consist of?
- We e-mail you our Corporation Questionnaire and 501c3 Questionnaires. They are Word documents and consist of questions where you type the information right on the Questionnaires and e-mail them back to us. In this way, we get all the information from you to prepare all your documents. Of course, we give you guidance to answering the questions in the questionnaires themselves, and are also available by phone should you need additional guidance. With the 501c3 Questionnaire, we also give you sample answers taken from cases that sped through the IRS process in less than six weeks.
- 8. What about the bookkeeping and tax returns after I get nonprofit status? Will I be able to handle this?
- It is complex to secure nonprofit status, but once you have the status, it is surprisingly easy to do the bookkeeping in most cases. Tax returns are not required to be filed for nonprofit organizations until gross revenues are more than $25,000 per year (Page 8-9 of IRS Publication 557, Rev. March, 2005). There are no federal tax returns required for churches. Most states require no tax returns from the organization (California is an exception). If your annual income exceeds $25,000, you will need to fill out the Form 990 informational tax return. If you are a private foundation, tax returns are more complex. With any organization, you need to keep good track of income and expenses.
- 9. What if I have already filed my Articles of Incorporation? Do you have a reduced fee?
- Yes, you will be on Plan B, and your fee is reduced by $300.
- 10. What about being under someone else’s nonprofit?
Be careful. There may be a problem lurking here. Tax-exempt status from the IRS is not something that can be passed around like a winter jacket. The IRS says that if you are going to be a subordinate organization included in a group exemption letter, you must be, in relation to the central organization, “subject to its general supervision or control” (Page 7 of IRS Publication 557, Rev. March, 2005). Is that something you want? Will you truly be subject to the general supervision or control of that organization? If not, you could be looking at problems with the IRS.
- 11. I have some problems with the IRSpast tax returns, an audit, owing them money, etc. Also, I have problems with my credit. I’m currently in bankruptcy. Will this affect getting tax-exempt status?
- Good news! Not at all. These problems will not in any way affect our ability to help you incorporate and obtain tax-exempt status.
- 12. Do you have lawyers and CPA’s on staff?
- Incorporation and creating corporate documents are a job for a lawyer, not a CPA or a layman. A CPA normally cannot create corporate documents. Tax-exempt status is a job for a lawyer or CPA. Founder/Director David Marmon is a Harvard-trained lawyer, licensed to practice law in California (inactive), Kansas (active) and before the U.S. Supreme Court. He is not currently active in practice, and he does not give legal or accounting advice. The work we will do for you will not be done as a lawyer. We want to keep the cost down for you. We would have to charge you three times as much if we did our work for you as lawyers do. A few years back, a good lawyer friend sent us an e-mail stating, "We are quoting $4,000-$5,000 for fees plus the costs. The most recent organization I worked on was an educational nonprofit which ended up paying close to $7,000…." (This was before the IRS greatly increased the paperwork for 501(c)(3) applications.) If you’d like us to refer you to him, we’ll be glad to do so. If you desire legal or tax advice, you should contact a lawyer or CPA.
- We do not give you any specific legal advice. If you have legal questions, you should consult a lawyer. We give you the benefit of our twenty-eight years of experience, but we will not give you specific legal advice. We take you through the process of incorporation and tax-exempt status in a standard way.
- We use the corporate legal documents, the Articles of Incorporation, the Bylaws, and other documents that we have developed since 1981 and that have been proven acceptable to the IRS. If later, you want to tailor your Bylaws to some specific need or desire (for example, to add an Advisory Board), you can amend them after the process is finished and you have your 501(c)(3) Determination Letter. We give you a sample form for a corporate resolution to amend your Bylaws, but we will not specifically advise you. We caution you to be very careful in making any substantive changes to our Bylaws. Unless you’re a lawyer, you may not know the ramifications of doing so. For example, your state law may have certain requirements you are unaware of.
- 13. They're not called "Articles of Incorporation" in my state. What about this?
- Different states call the basic organizational document by different names: Articles of Incorporation, Certificate of Incorporation, Articles of Organization, Articles of Agreement, Articles of Association or Charter. For simplicity, we call them Articles, or Articles of Incorporation. This is sometimes called the charter or constitution of the organization.
- 14. We don’t have an office yet for our nonprofit organization or a location yet for our church/congregation/school. Can we still get tax-exempt status?
- Yes. You can have your nonprofit office in your home, and your church or congregation can meet in someone’s home. Neither of these situations will keep you from getting tax-exempt status.
- To be classified as a school, you must have facilities where the educational activities are regularly carried on. If your school does not have facilities, it can still get tax-exempt status as an educational organization.
- 15. Do you file the Articles in my state?
- In the past, we did that, but we found a much better and faster way. We prepare your Articles and cover letter to meet all your state requirements and e-mail them to you as Adobe PDF files. You open the files, print them out, and follow our simple and concise instructions. We tell you how many originals and how many copies you need to send and how to make out your check to your Secretary of State. No more snail mail between you and us. Much faster to get you up and going.
- 16. What is the difference between general nonprofit status and church nonprofit status with the IRS?
- You can obtain tax-exempt status for a nonprofit organization on the basis of a future plan. This is not true of church status. You must have a current operating church to obtain church status. Churches do not file any tax returns. A very small church, and/or one made up mostly of family members, may obtain 501(c)(3) status as a general nonprofit until it is large enough to qualify as a church.
- 17. What about the IRS User Fee?
- The IRS charges a $300 or $750 User Fee to process your application. If your projected annual gross income for your first three years of operation (or up to four past years of operation if Plan B) is under $10,000 per year, then the $300 user fee applies to you. If it's over $10,000 per year, then the $750 user fee applies.
- 18. What about sending our Questionnaires back to you?
- We e-mail you each Questionnaire as an MS Word documents. After saving the document, you type the answers right on the document and send us a reply e-mail, attaching the document to it.
- 19. When we send back our Questionnaires to you, how long does it take you to process it and take the next step for us?
- From the time we receive your completed Questionnaires, we guarantee to e-mail you your documents within five business days or we pay you $200. The five business days excludes weekends, U.S. national holidays and times our web site says we are closed. Since there are two sets of questionnaires (one for state and one for federal), this means that you can have all your documents in a little over a week after you get started (assuming you get the Questionnaires right back to us). Now that is fast!
- 20. What about the 501(c)(3) application, Form 1023, etc.?
- We prepare and send you the 501(c)(3) tax exempt application (Form 1023) for date and signature. We also prepare Schedule A for churches and Schedule B for schools and any other schedules that may apply to you. Using our instructions, you prepare any attachments and attach them to the Form 1023 and include a copy of your Articles and Bylaws (and whatever other documents we instruct you) and your check for the IRS User Fee.
- 21. What about communicating with the IRS? Will we be communicating directly with the IRS?
- Most often, when you send in your application to the IRS, that is the end of the process for you. You receive a letter acknowledging that your application has been received by the IRS. Then you wait until you receive your determination letter recognizing your tax-exempt status. However, depending on how clearly and completely you described your activities on the 501c3 Questionnaire, it is not uncommon for the IRS to have additional questions for you. Responses to these questions enable the IRS to get a better understanding of your operations in order to determine that your organization is tax-exempt. If you get additional questions, you will prepare the answers and send them directly to the IRS (we give you a sample cover letter to use). If you don't understand any question from the IRS or feel you need some direction in answering the question, please contact us, and we'll help you understand it and guide you in the answer.
- 22. Are there any limitations on the kinds of organizations you will incorporate and obtain nonprofit status for?
- Normally, no. In complex cases, or in cases where you desire incorporation with formal (voting) members, we will decline to perform our incorporation service. We advise you to seek the services of a lawyer in such cases. A church/congregation with informal members (which is what we recommend) is never a problem. (Informal members may be called members, but they do not have voting control over the church/congregation.) However, even in the event that we will not handle the incorporation for you, we can still handle the 501c3 process for you.
- 23. Is it true that you will put us on your web site? Is there a charge for this?
- We put basic information on our web site for most all of our clients. The Internet address is www.tax-exempt-status.com/a_list_of_some_of_our_clients.html. Those who see your listing can find out basic information about your nonprofit and how to contact you. (We reserve the right to select whom we list.) There is NO CHARGE for this service.
- 24. When the process is over, are we still a part of tax-exempt-status.com? Do you continue to provide a service to us?
- Once we finish the process for you, we step out of the picture. You are completely independent. You are not under our “umbrella” or tied to us in any way. We gently "push you away from the dock" with our final letter full of helpful parting advice and very useful sample forms (Unanimous Written Consent of Directors (for Corporate Resolutions), Resignation of Director or Officer, Unanimous Written Consent of Directors to Set Time and Date for Annual Meeting of Board of Directors, Unanimous Written Consent of Directors to Change Location of Annual Meeting of Board of Directors, Unanimous Written Consent of Directors to Establish End of Annual Accounting Period, Waiver of Notice and Consent to Holding of Annual Meeting of Board of Directors, Minutes of Annual Meeting of Board of Directors, Waiver of Notice and Consent for Special Meeting of Board of Directors and Minutes of Special Meeting of Board of Directors ).
At that point, our service is finished. There are no additional costs and no other services that we perform.
- 25. You refer to Plan B. What is plan B?
- Plan B is when you come to us with your Articles of Incorporation already filed. (Plan A is when you haven't yet filed your Articles of Incorporation). Under Plan B, you save $300, but bear in mind if you try to file your Articles yourself, you have to satisfy the IRS requirements as well as your state requirements. More than half of clients who come to us with Articles already filed end up having to amend their them. Unless you really know what you are doing, you are better off letting us handle your incorporation.
- 26. What is your refund policy?
We take 4 steps for you. Step 1, we send you the Corporation Questionnaire and accompanying documents. Step 2, at the same time, we e-mail you your 501c3 documents. Step 3, we e-mail you your corporate documents. Step 4, we e-mail you the 501c3 documents.
If we have taken Step 1, 75% of total fee is refundable, Step 2, 50%, Step 3, 25%, and Step 4, 0%. A refund request for steps not taken must be made within 30 days of signup.
- 27. Is there a time limit on sending back your Questionnaires?
Yes, the Corporation Questionnaire will not normally take more than about 45 minutes. The 501c3 Questionnaire will normally take a couple of hours (attachments and financials will take longer, but they do not come back to us). Churches will take a couple of hours more.
When we send you each questionnaire, you have two weeks to complete it and send it back to us. We give you an additional two week automatic grace period. After that, you incur a late fee of $100 per month.
If you have not completed both sets of questionnaires (Corporation and 501c3) by the end of six months (and made any payments due), we pull you out of our database, and you have lost your investment.
All the information you give us is strictly confidential and will not be shared or sold to anyone for any reason.
- 29. Why do you mention that your documents look good?
We believe everything we do in life should be the best we can do and that your legal documents should not only be excellent from a legal point standpoint (most important), but also be esthetic and pleasing to the eye. Generally, legal documents are pretty boring. At least, ours look good! (Exception: Articles of Incorporation and government forms have to follow a specific format and cannot be made to look good.) Take a look at our documents.
- 30. What if we are outside the U.S.?
No problem. We incorporate and obtain tax-exempt status for people all over the world. That's one advantage of doing everything by e-mail. Your directors do not need to be U.S. citizens nor reside in the U.S. (see question 3. above for more details.)
- 30. What about Group Exemptions (Plan C and Plan D)
Plan C is where you come to us desiring a Group Exemption, and Plan D is used for each of various chapters or churches you wish us to incorporate for you.
A Group Exemption Letter is given by the IRS to a central organization that has subordinates (or chapters) so that the subordinates or chapters do not have to file for their own 501c3 tax-exempt status. We do both the application for group exemption for the central organization as well as prepare the corporate and incorporation documents for the subordinate organizations. The IRS User Fee is $900 for a Group Exemption Letter, and our fee is the normal nonprofit fee plus $600 (base fee of $2545 rather than $1945). Our fee for the corporate and incorporation documents is $500 for each subordinate ($800-$1100 for New York). The group exemption letter can be useful for churches that wish to have "daughter" churches under a head or principal church (denominational model).
Group exemptions are for related organizations that are very similar to each other in their structure, purposes and activities. The central organization generally supervises or controls many chapters, called subordinate organizations. An example of this would probably be the Rotary Club. To qualify for a group exemption, the central organization and its subordinates must have a defined relationship. Subordinates must be affiliated with the central organization and subject to its supervision or control.
For more information, please see Group Exemptions.
© Copyright 2009, tax-exempt-status.com