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Non-Profit Filing for Charities

What's the difference between charities and private foundations?

Every exempt charitable organization is classified as either a public charity or a private foundation. Generally, organizations that are classified as public charities are those that:

  • Are churches, hospitals, or are qualified medical research organizations affiliated with hospitals and schools
  • Have an active program of fundraising and receive contributions from many sources
  • Receive income from activities that further the organization’s exempt purpose(s)
  • Actively function in a supporting relationship to one or more existing public charities.

Private foundations typically have a single major source of funding. Their activities are also primarily to make grants to other charitable organizations and to individuals, rather than directly operating a charitable program.

How do you apply for tax exempt status from the IRS?

You can acquire 501(c)(3) tax exemption by filing IRS Form 1023. There are two key requirements for an organization to be exempt from federal income tax under section 501(c)(3). A 501(c)(3) organization must be organized as a corporation, trust, or an unincorporated association, with its organization document defining the organization's purpose(s). The organization must also permanently dedicate its assets to exempt purposes, and operated to further one or more of the exempt purposes stated in its organization document.

What are the requirements for exemption?

In order to be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization needs to be organized and operated for exempt purposes exclusively. None of the organization's earnings may inure to any private shareholder or individual. Additionally, the organizations may not act for and as a political organization to influence legislation as a part of its funcitoning activities.

What is power of attorney?

According to the IRS, if your organization is represented by a third party, you need to file a power of attorney authorizing the individual to represent your organization. Form 2848, Power of Attorney and Declaration of Representative, should be used for this purpose. If you want the third party to be able to receive information about your case, but not to represent you, use Form 8821, Tax Information Authorization, instead of Form 2848.

What is the unrelated business income tax?

Even if your organization is tax exempt, it may still be responsible for tax on its unrelated business income. Most of the time, unrelated business income is income that is not substantially related to the tax exempt purpose that is the basis of the organization's exemption.

Which 990 Form Should Charities File?

Every exempt charitable organization is classified as either a public charity or a private foundation. Public charities come in all different sizes, and can file Form 990-N, Form 990-EZ, or the long Form 990 depending on their gross receipts. On the 990 series return, a charity provides information on the activities and policies of its charitable facilities that it operated during the tax year. This includes facilities operated either directly or through disregarded entities or joint ventures.

Choose Your Gross Receipt and Start Filing with ExpressTaxExempt

Conditions Forms to File Action
Gross receipts normally ≤ $50,000 Form 990-N Start Filing Now
Gross receipts < $200,000, and Total assets < $500,000 Form 990-EZ Start Filing Now
Gross receipts ≥ $200,000, or Total assets ≥ $500,000 Form 990 Start Filing Now

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Find answers related to e-filing IRS Form 990, 990-EZ, 990-N (e-Postcard) and Extension Form 8868 with our Frequently Asked Questions.

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