IRS publication 557 is a document that the Internal Revenue Service (IRS) of the United States. The publication explains in detail all the rules and regulations that an organization should follow to obtain status of tax exemption. IRS 557 provides necessary guidance to organizations regarding the required documents and forms. The publication discusses the process of appeals if the IRS does not approve the tax exemption status and also the causes for revocation of the exemption status. If the IRs grants an organization exemption status, the organization should follow certain specific filing requirements and also furnish disclosures that the organization should provide to persons donating funds to that organization.
Pub 557 Isn’t for All Organizations
IRS publication 557 is not applicable to all organizations that seek the status of tax exemption from IRS and all organizations do not automatically become eligible for such tax exemption. Only certain organizations such as employee-funded pensions, mutual insurance companies, and teachers’ retirement funds are eligible to seek exemptions and these details are available in other documents that the IRS has published. However, IRS 557 furnishes a reference chart which explains in detail the section of the Internal Revenue Code that is applicable to an organization to qualify for such tax exemption status. The publication also provides the necessary forms that the organization seeking tax exemption should fill out to apply for this exemption.
Rules for Tax Exemption
The rules for tax exemption come under Section 501(c)3 would appear quite complicated for normal people, especially those who wish to start a nonprofit corporation or an unincorporated nonprofit organization. The main reason for the IRS publishing 557 is to determine the exact worthiness of the applications that seek tax exemption. It is important that the IRS filters out the organizations that simply try to gain tax advantage on false claims but provides exemption to organization that have real intentions of performing activities beneficial either to a particular segment of the society or the entire society itself.
IRS Form 1023
If you wish to find out whether your intentions to claim tax exemption under Section 501(c)3 from the IRS and plan to file for such nonprofit tax exemption, you should definitely go through IRS publication 557 thoroughly. Only when you understand the various sections of IRS 557, you would be able to fill up the IRS form 1023 properly. Section 501(c) of the IRS categorizes organizations as nonprofit tax exemption organizations into 28 different categories. IRS also lists certain other categories of nonprofit organizations under Section 501(d), Section 501(e), Section 501(f), Section 501(k), Section 501(n), and Section 521(a).
Such huge list of categories might be quite confusing to normal persons. Hence, it is advisable to consult an expert in tax issues and the functioning of the IRS before you plan to start any nonprofit organization. This would help you to find out the most beneficial and practical entity that you should create for the kind of work that you plan to perform. You should not commit yourself to any particular filing about the type of organization but decide carefully so that you are actually able to obtain the necessary tax exemption from the IRS, without getting rejected.