Filing for the Proper Tax Exemption

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Filing for the Proper Tax Exemption is a presentation designed for Christian Sororities and Fraternities.

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Filing for the Proper Tax Exemption

  1. 1. FILING FOR THE PROPER EXEMPTION Section 501(c) Organizations Presented By Freda Stevens, Chair4/19/2013
  2. 2. Disclaimer• This presentation is brought to you as a courtesy of National Council of Christian Leaders.• It is not intended to take the place of legal advice.• For more information on applying tax exempt status contact the IRS directly or a tax attorney.• For more information on this presentation contact NCCL at nationalccls@gmail.com 4/19/2013
  3. 3. New Sororities & Fraternities• One of the first things you need to do is apply for an Employer Identification Number (EIN).• Every organization needs to have a EIN.• To obtain an EIN takes less than 5 minutes. 4/19/2013
  4. 4. There are 4 ways to apply• Apply online- https://sa1.www4.irs.gov/modiein/individual/index.jsp• Complete an online application and receive the EIN in minutes. Download and print your EIN verification letter.• Apply over the telephone-Call 800.829.4933 and receive an EIN in minutes.• Apply by the mail-download form SS-4 and mail to the address on the form.• Apply by fax-download form SS-4 and fax to the number on the form. 4/19/2013
  5. 5. What is your next step?• Request recognition for the CORRECT tax exemption.• There are two ways to receive tax exempt status: A. Formal recognition through application (application fee, takes time to receive, definitive) B. Treated as an exempt organization (no fee, verbal request , no application, takes less than 10 minutes) 4/19/2013
  6. 6. Which exemption can my CGLO qualify for? The best thing to do is contact the IRS directly with any questions on which 501c exemption would best fit your CGLO. 4/19/2013
  7. 7. How are most CGLO’s classified?There are several tax exemptions which mostsororities and fraternities will qualify for; however,determining which exemption is best for you is adecision that must be made by your organization.4/19/2013
  8. 8. Publication 557Download Pub 557 from www.irs.gov for anoverview of each tax exemption classificationhttp://www.irs.gov/publications/p557/ch04.html#en_US_2011_publink10002003254/19/2013
  9. 9. Review of SOME 501c exemptions• This presentation will review three common tax exemptions for sororities and fraternities.• This presentation does NOT contain a complete list of available tax exemptions.• Contact the IRS and review pub 55 for a complete listing of available tax exemptions.• The three exemptions explored in this presentation are 501c3, 501c7, and 501c10. 4/19/2013
  10. 10. Domestic Fraternal Societies (501(c)(10))• A domestic fraternal society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. The application and accompanying statements should establish that the organization:• Is a domestic fraternal organization organized in the U.S.,• Devotes its net earnings exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes, and 4/19/2013
  11. 11. Domestic Fraternal Societies (501(c)(10))• Does not provide for the payment of life, sick, accident, or other benefits to its members.• The organization can arrange with insurance companies to provide optional insurance to its members without jeopardizing its exempt status.• Operates under the lodge system, (See definition) 4/19/2013
  12. 12. Lodge system definedOperating under the lodge system means carryingon activities under a form of organization thatcomprises local branches, chartered by a parentorganization and largely self-governing, calledlodges, chapters, or the like.4/19/2013
  13. 13. Domestic Fraternal Societies (501(c)(10))Tax treatment of donations.Donations by an individual to a domestic fraternalbeneficiary society or a domestic fraternal societyoperating under the lodge system are deductible ascharitable contributions only if used exclusively forreligious, charitable, scientific, literary, oreducational purposes or for the prevention ofcruelty to children or animals.4/19/2013
  14. 14. 501(c)(7) - Social and Recreation ClubsIf your club is organized for pleasure, recreation, and other similar nonprofitablepurposes and substantially all of its activities are for these purposes, it should fileForm 1024 to apply for recognition of exemption from federal income tax.In applying for recognition of exemption, you should submit the informationdescribed in this section. Also see chapter 1 for the procedures to follow.Typical organizations that should file for recognition of exemption as social clubsinclude:•College alumni associations that are not described in chapter 3 under Alumniassociation ,•College fraternities or sororities operating chapter houses for students,•Country clubs,•Amateur hunting, fishing, tennis, swimming, and other sport clubs,•Dinner clubs that provide a meeting place, library, and dining room for members,•Hobby clubs,•Garden clubs, and•Variety clubs. 4/19/2013
  15. 15. 501(c)(7) - Social and Recreation Clubs• Discrimination prohibited. Your organization will not be recognized as tax exempt if its charter, bylaws, or other governing instrument, or any written policy statement provides for discrimination against any person on the basis of race, color, or religion.• However, a club that in good faith limits its membership to the members of a particular religion to further the teachings or principles of that religion and not to exclude individuals of a particular race or color will not be considered as discriminating on the basis of religion. Also, the restriction on religious discrimination does not apply to a club that is an auxiliary of a fraternal beneficiary society (discussed later) if that society is described in section 501(c)(8) and exempt from tax under section 501(a) and limits its membership to the members of a particular religion.• Tax treatment of donations. Donations to exempt social and recreation clubs are not deductible as charitable contributions on the donors federal income tax return. 4/19/2013
  16. 16. 501(c)(3)-Charitable Organizations• To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.• Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170. 4/19/2013
  17. 17. Exempt Purposes definedThe exempt purposes set forth in section 501(c)(3) arecharitable, religious, educational, scientific, literary, testingfor public safety, fostering national or international amateursports competition, and preventing cruelty to children oranimals. The term charitable is used in its generallyaccepted legal sense and includes relief of the poor, thedistressed, or the underprivileged; advancement of religion;advancement of education or science; erecting ormaintaining public buildings, monuments, or works;lessening the burdens of government; lesseningneighborhood tensions; eliminating prejudice anddiscrimination; defending human and civil rights secured bylaw; and combating community deterioration and juveniledelinquency. 4/19/2013
  18. 18. Filing RequirementsGenerally, tax-exempt organizations must file an annualinformation return ( Form 990 or Form 990-EZ). Tax-exempt organizations that have annual gross receiptsnot normally in excess of $25,000 ($50,000 for taxyears ending on or after December 31, 2010) are notrequired to file the annual information return; theymay be required to file an annual electronic notice,however. In addition, churches and certain church-affiliated organizations are excepted from filing.Failure to file the annual return for 3 consecutive yearsmay result in automatic revocation of exemption.4/19/2013
  19. 19. Annual Electronic Notice-e-Postcard• The e-Postcard is due every year by the 15th day of the 5th month after the close of your tax year. For example, if your tax year ended on December 31, the e-Postcard is due May 15 of the following year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is the next business day.• You cannot file the e-Postcard until after your tax year ends.• http://www.irs.gov/Charities-&-Non-Profits/Annual- Electronic-Filing-Requirement-for-Small-Exempt- Organizations--Form-990-N-%28e-Postcard%29 4/19/2013
  20. 20. Contacts• Charities & Non-Profits• For answers to technical and procedural questions about charities and other non-profit organizations, call IRS Tax Exempt and Government Entities Customer Account Services at (877) 829-5500 (toll-free number). If you prefer to write, use the address below.• For answers to employment tax questions, call the Business and Specialty Tax Line at (800) 829-4933 (toll-free).• To obtain a determination letter that applies the principles and precedents previously announced to a specific set of facts, or to transmit copies of amended documents, write to: Internal Revenue Service Exempt Organizations Determinations P.O. Box 2508 Cincinnati, OH 45201 4/19/2013

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