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Do I Have to File for Tax Exempt Status to Be a Nonprofit?

By , About.com Guide

Question: Do I Have to File for Tax Exempt Status to Be a Nonprofit?
Answer: Do not confuse an IRS registered, tax-exempt 501(c)(3) nonprofit with a non-exempt charitable organization. Many groups serve the public but are not registered with the IRS as a nonprofit.

Some "charitable" organizations do register with the state in which they reside and even incorporate in that state as nonprofit corporations and never apply for federal tax-exempt status

However, many small "charitable" organizations never seek recognition as a nonprofit from their state or the federal government. The disadvantage to not becoming a registered nonprofit is that donors cannot take a tax deduction on their donations, and you cannot receive grants from foundations or corporations.

Becoming a 501(c)(3) organization is not for the faint of heart. It involves a lot of paperwork and some expense. Think carefully before you begin the arduous process of a becoming a tax-exempt nonprofit organization. If your purpose is simple and/or time limited, you may be able to accomplish your mission without tax-exempt status.

Back to FAQ's About Starting a Nonprofit Organization

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