IRS Form 1024: Gets You Started on Tax Exempt Status

What’s the Difference Between 501(a) & 501(c)(3)?

These labels are both Internal Revenue Service terms for tax-exempt organizations.  By tax exempt group we mean an organization that is formed not to make money for any person or corporation, but to give services or information, promote civil rights, or spread religion.  Tax exempt organization also must not be involved in any political campaign.  So, two basic rules: not to make money and not to get involved in a political campaign.

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But what’s the difference between 501(a) and 501(c)(3)?  Both are types of tax-exempt organizations but the difference is that one is public and one is private.  501(a) is for private membership.  501(c)(3) is open to the public.  To apply for tax-exempt position, they also use different Internal Revenue Service application forms.  501(a) uses IRS Form 1024.  501(c) (3) uses IRS Form 1023.

Use IRS Form 1024 when your organization will be comprised of a select private group.  An example would be a group of employees who form a tax exempt organization to promote awareness of benefits on the job.

How to Create a Tax Exempt Organization

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An Exempt Organization requires a hefty amount of paperwork, from beginning to end.  One of the first things you would do for your new organization would be to apply for tax exempt status.  IRS Form 1024 is used to apply for federal tax exempt status.  The IRS likes to call this form Application for Recognition of Exemption under Section 501(a).  Judging by the short length of the Form 1024 Instructions that go with the form, it’s not too difficult to fill out.

You’ll also need an Employer Identification Number (EIN) from the IRS but don’t worry that’s an even shorter and easier form to fill out.  In fact, you can apply for an EIN online and have a number the same day.  If only all IRS transaction were so hassle-free!

And third you’ll need to create your tax-exempt organization under whatever state law in which you’re going to be operating.  Go to your state’s website for those directions and forms.

You’ve Submitted IRS Form 1024: Now What?

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Now you wait, but the IRS helps you through the system.  They even have a handy dandy interactive question and answer guide to applying for Section 501(a) status.  The IRS will procedure Form 1024 forms in the order that they were received unless you have a compelling reason to hurry up the process and skip ahead of others in line. These are…

    Your new organization is set up to provide relief to disaster victims.  In this case time is of the core.

    You require the status fast as you’re trying to apply for a grant that will go away if you miss a time limit

    The IRS messed up and caused your application to get bumped back in line.  Explain carefully and they may help you out.

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