We have an EIN and file 990-N annually but fall under the classification of a group self declares our tax exempt status because we make less than $5,000 a year. We have not gone through the formal 501(c)(3) application process with the IRS. I was talking with IRS today and I believe I understood them to say we cannot give a form to a donor stating their contribution is tax deductible.
If that is the case how can we assure potential donors we are tax deductible and doesn’t a donor need documentation for when they file their taxes?
One of the major drawbacks for small 501(c)(3) organizations who chose to “self-declare” their tax exempt status is that they lack the official IRS determination letter proving that donations are tax deductible (See the photo above for an example of the IRS determination letter).
This important letter can give donors assurance that their donations are indeed tax deductible.
Technically, your organization can still receive tax deductible donations, but your organization lacks “proof” to show a donor.
A donor must keep a record if the donation is more than $250. This record is usually a letter from the charity, but a bank record (a cancelled check) may suffice. This record is only given to the IRS if the donor is being audited by the IRS.
Your homeschool group may be listed in the IRS database of Exempt Organizations since you have been filing your Form 990-Ns every year. Visit IRS Select Check and see if your can find your organization listed as “Has filed Form 990-N” or “Are eligible to receive tax-deductible charitable contributions.” If you are in the IRS database you can be assured that you can accept tax deductible contributions.
The best way to assure potential donors would be to file the Form 1023-EZ (fee $275 to the IRS and takes about 3-4 weeks). Then you get the official IRS determination letter.
I can assist you in filing the Form 1023-EZ. While it is a much simpler form than the full Form 1023, it can be confusing and you will want to be sure it is filed correctly.
Email me if you’d like my help.
Carol Topp, CPA