How to register a nonprofit organization?

[Mike]

How do you register a nonprofit organization in the United States, and what are the associated tax implications? My mother is actively involved in social work, and now she and her friends are planning to establish a charity or nonprofit organization. Could you please explain

• What is the step-by-step process for registering a nonprofit at both the federal and state levels?
• Tell me the procedures for obtaining tax-exempt status.
• What are the overall tax implications once the nonprofit status is secured?

[Kaile]

That's a very good initiative your mother is taking. To register the nonprofit organization, you need to do the following things:

1. You need to incorporate with your state's Secretary of State.
2. Apply for an EIN (Employer Identification Number). The IRS issues this number.
3. File IRS Form 1023 (or 1023-EZ). The difference depends on the annual gross receipts.

If the forms are approved, then the IRS sends the "Determination Letter" and confirm 501(c)(3) tax-exempt status. Once you get this status, then you need to separately apply for state-level tax exemptions. Once 501(c)(3) status is granted, your organization enjoys significant tax benefits.

About the tax implications:

1. Your organization needs to file the annual IRS returns (Form 990 series).
2. Benefits include tax exemption and deductible donations.