Being a non-profit organization in Illinois does not automatically qualify you as tax exempt. Before beginning the process of filing for tax-exempt status, decide if you want to apply for a 501(C ) (3) and federal tax-exempt status. Certain charities, churches, schools and other organizations fall into that category. The wording is important and some are not acceptable when filing for a 501 (C )(3). “Social,” “benevolent,” and “athletic” are not useful when applying. It is not required for an organization to be incorporated to file for a tax break.
When a non-profit organization exists entirely for educational, religious or charitable purposes, an application can be made for an Illinois exempt number or E-number. The E-number exempts the nonprofit from paying sales taxes on most of their purchases made in relation to the charity. However, the charity must collect sales tax if they place items for sale.
How to Apply for an Illinois Tax-exempt Number
There is no fee to apply for an E-number in Illinois, but you will need to fill out a STAX-1 application. The form or application is sent to the Illinois Department of Revenue. When you send the application, there are a number of other things you need to include. These documents are useful for explaining the goals and activities of the charity. Here are the items you will need to include:
- Application for Sales tax Exemption Form STAX-1
- If you are incorporated, the articles of incorporation
- Organization’s constitution if it’s not incorporated
- IRS letter stating your federal tax-exempt status
- Most current financial statement (unless yours is a religious organization)
- An explanation of the activities, functions, and purpose of the organization
- Any printed materials that explain the functions, purpose, and activities
These items can be mailed via the postal service at this address:
Sales Tax Exemption Section 3-520
Illinois Department of Revenue
101 W Jefferson St.
Springfield, IL 62702-5145
The application can also be filled out online at MyTax Illinois.
Filing for Tax-exempt Status with the IRS
You will need an IRS Form #1023 to file for a tax-exempt status with the IRS. It is a very long, very detailed form requesting a lot of information about the organization. You’ll be asked about its history, its organizational structure, the finances, activities, operation, and lots more. If your nonprofit is not projected to have annual assets over $50,000 you may be eligible to file a shorter form, the Form 1023-EZ.
How is the Illinois E-number Used?
Once you receive notification your exemption request was accepted by the Illinois Department of Revenue, you will receive your E number in the mail. Any purchases you make for the organization that are related to the charitable purpose will be exempt from state sales tax. Just present the E-number at the time the purchase is made. It should take about three to four weeks to receive the E- number. It consists of nine digits following an E. The E-number will need to be renewed every five years using the same process.
If you want to learn more about filling a tax-exempt status or to check if your non-profit organization is exempted from tax, contact James C. Provenza today and schedule an appointment. Call us today at (847) 729-3939 for all non-profit group, estate planning, or federal tax-related services.