What organizations should understand about applying for tax-exempt status

Organizations that want to apply for recognition of tax-exempt status under Section 501(c)(3) of the tax code use a Form 1023-series application. Here are some tips to help them understand the process.

  • The application process on IRS.gov includes a step-by-step guide explaining how to apply for tax exempt status.
  • Form 1023-series applications for recognition of exemption must be submitted electronically online at www.pay.gov. The application must be complete and include the user fee.

    • Some types of organizations don’t need to apply for Section 501(c)(3) status to be tax-exempt. These include churches and their integrated auxiliaries, and public charities with annual gross receipts normally no more than $5,000.

    • An employer identification number is a nine-digit number that IRS assigns to identify a business’ tax accounts. Every tax-exempt organization should have an EIN, even if they don’t have any employees. Their EIN must be included on the application. Organizations can get an EIN by calling 800-829-4933 or apply online.

    • The effective date of an organization’s tax exempt status depends on their approved Form 1023. If they submit this form within 27 months after the month they legally formed, the effective date of their organization’s exempt status is the legal date of its formation. If an organization doesn’t submit this form within those 27 months, the effective date of its exempt status is the date it files Form 1023

    • Once the IRS determines an organization qualifies for tax exempt status under the law, it will also be classified as a private foundation unless the organization meets the requirements to be treated as a public charity.

    • A charitable organization must make certain documents available to the public. These include its approved application for recognition of exemption with all supporting documents and its last three annual information returns. See Publication 557, Tax Exempt Status For Your Organization for additional information on public inspection requirements.

More information:
Applying for exemption – Frequently asked questions
Form 1023 – Frequently asked questions
Stay Exempt – Tax basics for exempt organizations
Exempt organization public disclosure and availability requirements – Frequently asked questions
Disclosure Requirements

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IRS online tool helps families see if they qualify for the Child Tax Credit; one of three tools now available for the upcoming advance payments

WASHINGTON — The Treasury Department and the Internal Revenue Service today urged families to take advantage of a special online tool that can help them determine whether they qualify for the Child Tax Credit and the special monthly advance payments beginning on July 15.

Available exclusively on IRS.gov, the new Child Tax Credit Eligibility Assistant, launched earlier this week, is interactive and easy to use. By answering a series of questions about themselves and their family members, a parent or other family member can quickly determine whether they qualify for the credit.

Though anyone can use this tool, it may be particularly useful to families who don’t normally file a federal tax return and have not yet filed either a 2019 or 2020 tax return. Often, these are people who receive little or no income, including those experiencing homelessness, low income households, and other underserved groups. Using this tool can help them decide whether they should take the next step and register for the Child Tax Credit payments on another new IRS tool unveiled earlier this week.

“This new tool provides an important first step to help people understand if they qualify for the Child Tax Credit, which is especially important for those who don’t normally file a tax return,” said IRS Commissioner Chuck Rettig. “The eligibility assistant works in concert with other features on IRS.gov to help people receive this important credit. The IRS is working hard to deliver the expanded Child Tax Credit, and we will be rolling out additional help for taxpayers in the near future. Where possible, please help us help others by distributing CTC information in your communities.”

To help people understand and receive this benefit, the IRS has created a special Advance Child Tax Credit 2021 page at IRS.gov/childtaxcredit2021 designed to provide the most up-to-date information about the credit and the advance payments. Among other things, the page already features a link to both the Non-filer Sign-up Tool, and the Child Tax Credit Eligibility Assistant, along with a third tool launched earlier this week—the Child Tax Credit Update Portal.

The Child Tax Credit Eligibility Assistant does not request any personally-identifiable information (PII) for any family member. For that reason, its results are not an official determination by the IRS. Though the results are reliable, if the questions are answered accurately, they should be considered preliminary. Neither the answers supplied by the user, nor the results, are retained by the IRS.

After checking the Eligibility Assistant, Non-filer Sign-Up Tool is available to help those who don’t normally file tax returns

The online Non-filer Sign-Up Tool is designed to help eligible families who don’t normally file tax returns register for the monthly Advance Child Tax Credit payments.

This tool, an update of last year’s IRS Economic Impact Payment Non-filers tool, is also designed to help eligible individuals who don’t normally file tax returns register for the $1,400 third round of Economic Impact Payments (also known as stimulus checks) and claim the Recovery Rebate Credit for any amount of the first two rounds of Economic Impact Payments they may have missed.

Developed in partnership with Intuit and delivered through the Free File Alliance, this tool provides a free and easy way for eligible people who don’t make enough income to have an income tax return-filing obligation to provide the IRS the basic information needed to figure and issue their Advance Child Tax Credit payments. This includes name, address, and social security numbers. This also enables them to provide information about their qualifying children age 17 and under, their other dependents, and their direct deposit bank information so the IRS can quickly and easily deposit the payments directly into their checking or savings account. It is available only on IRS.gov.

The Non-filer Sign-Up tool should not be used by anyone who has already filed a 2019 or 2020 federal income tax return.

No action needed by most other families

Eligible families who already filed or plan to file 2019 or 2020 income tax returns should not use the Non-filer Sign-Up Tool. Once the IRS processes their 2019 or 2020 tax return, the information will be used to determine eligibility and issue advance payments.

Families who want to claim other tax benefits, such as the Earned Income Tax Credit for low-and moderate-income families, should not use this tool and instead file a regular tax return. For them, the fastest and easiest way to file a return is the Free File system, available only on IRS.gov.

Watch out for scams

The IRS urges everyone to be on the lookout for scams related to both Advance Child Tax Credit payments and Economic Impact Payments. The IRS emphasized that the only way to get either of these benefits is by either filing a tax return with the IRS or registering online through the Non-filer Sign-up Tool, exclusively on IRS.gov. Any other option is a scam.

Watch out for scams using email, phone calls or texts related to the payments. Remember, the IRS never sends unsolicited electronic communications asking anyone to open attachments or visit a non-governmental web site.

Child Tax Credit Update Portal

Earlier this week, Treasury and IRS launched another useful tool, the Child Tax Credit Update Portal. Initially, this tool only enables anyone who has been determined to be eligible for advance payments to see that they are eligible and unenroll from (opt out of) the advance payment program. Later, it will allow people to check on the status of their payments and make updates to their information, including their bank account information. Later this year, the tool will also be available in Spanish.

Community partners can help

The IRS urges community groups, non-profits, associations, education organizations and anyone else with connections to people with children to share this critical information about the Advance Child Tax Credit as well as other important benefits. Among other things, the IRS is already working closely with its community partners to ensure wide access to the Non-filer Sign-up Tool and the Child Tax Credit Update Portal. The agency is also providing additional materials and information that can be easily shared by social media, email and other methods.

About the Advance Child Tax Credit

The expanded and newly-advanceable Child Tax Credit was authorized by the American Rescue Plan Act, enacted in March. Normally, the IRS will calculate the payment based on a family’s 2020 tax return, including those who use the Non-filer Sign-up Tool.  If that return is not available because it has not yet been filed or is still being processed, the IRS will instead determine the initial payment amounts using the 2019 return or the information entered using the Non-filers tool that was available in 2020.

The payment will be up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 through 17.

To make sure families have easy access to their money, the IRS will issue these payments by direct deposit, as long as correct banking information has previously been provided to the IRS. Otherwise, people should watch their mail around July 15 for their mailed payment. The dates for the Advance Child Tax Credit payments are July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15, and Dec. 15.

People who don’t have to file taxes may need to register for monthly advance child tax credit payments

The IRS Non-filer Sign-up Tool offers a free and easy way for eligible people who don’t normally have to file taxes to provide the IRS the basic information needed – name, address, and Social Security numbers – to figure and issue advance child tax credit payments. Often, these are individuals and families who receive little or no income, including those experiencing homelessness.

Here’s who should use this tool
This tool is for people who did not file a tax return for 2019 or 2020 and did not use the IRS Non-filer tool last year to register for Economic Impact Payments. It enables them to provide required information about themselves, their qualifying children age 17 and under, their other dependents, and their direct deposit bank information so the IRS can quickly and easily deposit the payments directly into their checking or savings account.

Here’s who should not use this tool
Eligible families who already filed or plan to file 2019 or 2020 income tax returns should not use this tool. Once the IRS processes their 2019 or 2020 tax return, the information will be used to determine eligibility and issue advance payments. Families who want to claim other tax benefits, such as the earned income tax credit, should not use this tool. They should file a regular tax return. For them, the fastest and easiest way to file a return is the Free File system, available only on IRS.gov.

About the advance child tax credit
The expanded and newly-advanceable child tax credit was authorized by the American Rescue Plan Act, enacted in March. Normally, the IRS will calculate the payment based on a person’s 2020 tax return, including those who use the Non-filer Sign-up tool. If that return has not yet been filed or is still being processed, the IRS will determine the initial payment amounts using the 2019 return or the information entered using the Non-filer tool that was available in 2020.

The payment will be up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 through 17.

The IRS will issue these payments by direct deposit if correct banking information has been provided to the IRS. Otherwise, people should watch their mail around July 15 for their mailed payment. The dates for the advance child tax credit payments are July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15 and Dec. 15.

See Advance Child Tax Credit Payments in 2021 on IRS.gov for details on eligibility and more helpful resources.

The IRS asks community groups, non-profits, associations, education organizations and anyone else with connections to people with children to share this critical information about the advance child tax credit as well as other important benefits.

More information:
FAQs on the 2021 Child Tax Credit and Advance Child Tax Credit Payments.

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Homeownership and taxes: Things taxpayers should consider when selling a house

It’s important for taxpayers to understand how selling their home may affect their tax return. When filing their taxes, they may qualify to exclude all or part of any gain from the sale from their income.

Here are some key things homeowners should consider when selling a home:

Ownership and use
To claim the exclusion, the taxpayer must meet ownership and use tests. During a five-year period ending on the date of the sale, the homeowner must have owned the home and lived in it as their main home for at least two years.

Gains
Taxpayers who sell their main home and have a gain from the sale may be able to exclude up to $250,000 of that gain from their income. Taxpayers who file a joint return with their spouse may be able to exclude up to $500,000. Homeowners excluding all the gain do not need to report the sale on their tax return.

Losses
Some taxpayers experience a loss when their main home sells for less than what they paid for it. This loss is not deductible.

Multiple homes
Taxpayers who own more than one home can only exclude the gain on the sale of their main home. They must pay taxes on the gain from selling any other home.

Reported sale
Taxpayers who don’t qualify to exclude all the taxable gain from their income must report the gain from the sale of their home when they file their tax return. Anyone who chooses not to claim the exclusion must report the taxable gain on their tax return. Taxpayers who receive Form 1099-S, Proceeds from Real Estate Transactions must report the sale on their tax return even if they have no taxable gain.

Possible exceptions
There are exceptions to these rules for some individuals, including persons with a disability, certain members of the military, intelligence community and Peace Corps workers.

Worksheets
Worksheets included in Publication 523Selling Your Home can help taxpayers figure the adjusted basis of the home sold, the gain or loss on the sale and the excluded gain on the sale.

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Checking withholding can help taxpayers decide if they need to give their employer a new W-4

All taxpayers should review their federal withholding each year to make sure they’re not having too little or too much tax withheld.

Employees, retirees and self-employed individuals can use the IRS Tax Withholding Estimator to help decide if they should make a change to their withholding. This online tool guides users, step-by-step through the process of checking their withholding, and provides withholding recommendations to help aim for their desired refund amount when they file next year. Taxpayers can check with their employer to update their withholding or submit a new Form W-4, Employee’s Withholding Certificate.

Adjustments to withholding
Individuals should generally increase withholding if they hold more than one job at a time or have income from sources not subject to withholding. If they don’t make any changes, they will likely owe additional tax and possibly penalties when filing their tax return.

Individuals should generally decrease their withholding if they qualify for income tax credits or deductions other than the basic standard deduction.

Either way, those who need to adjust their withholding must prepare a new Form W-4, Employee’s Withholding Certificate. They need to submit the new Form W-4 to their employer as soon as possible since withholding occurs throughout the year.

Individuals who should check their withholding include those:

  • whose spouse is an employee
  • who are working two or more jobs at the same time or who only work for part of the year
  • who claim credits such as the child tax credit
  • with dependents age 17 or older
  • who itemized deductions on prior year returns
  • with high incomes and more complex tax returns
  • with large tax refunds or large tax bills for last year

Tax Withholding Estimator benefits
The IRS Tax Withholding Estimator can help taxpayers:

  • determine if they should complete a new Form W-4.
  • know what information to put on a new Form W-4.
  • save time because the tool completes the form worksheets.

Taxpayers should prepare before using the Tax Withholding Estimator by having their most recent pay statements, information for other income sources and their most recent income tax return. The tool does not ask for sensitive information such as name, Social Security number, address, or bank account numbers.

State or local withholding
Some individuals might also need to adjust their state or local withholding. They can contact their state’s department of revenue to learn more.

More information:
Video: How to Use the IRS Withholding Estimator
Tax Withholding Estimator FAQs
Publication 505, Tax Withholding and Estimated Tax

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Local IRS Offices

York
2670 Industrial Hwy, York, PA 17402
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:30pm)
(717) 757-4977

Harrisburg
228 Walnut St, Harrisburg, PA 17101
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:00pm) (717) 777-9650

Lancaster
1720 Hempstead Rd, Lancaster, PA 17601
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:00pm)
(717) 291-1994










NATP

National Association of Tax Professionals