You can come across with tax exemption in many aspects of business; however, you should strictly understand that the main mission of tax exemption is to cut or completely remove your commitment to pay taxes.That being said the question remains, what is considered a tax exemption in the US? Generally, there are several ways to become tax exempt, and from time to time, governments exempt different organizations from paying taxes. Let’s try to understand which organizations can apply for the tax exemption program and why.
There is a list of organizations which are not required to pay taxes. As a rule, it is non-profitable or charity organizations which are not making profit from their business. However, there are also several exemptions for some businesses that can become tax exempt since it is the best way to reduce current taxes. But first let’s try to understand the whole structure of being tax exempt.
The meaning of tax exempt
Being tax exempt means that an individual or business income can be exempt from paying taxes on federal or local levels. Of course, it is the best way for cutting your taxes. However, let’s try to understand whether you can apply for becoming tax exempt or not. Along with organizations, some individuals can also become tax exempt.
Keep in mind that if you have not reached the age 65, are not married and your annual income is less than $12,000, you cannot apply for the tax-exempt program.
For applying to the tax exemption program, you have to fill an IRS form 12 months after incorporation. It will help your nonprofit company get tax exempt from the date of launching it. If you have a small nonprofit company, you will have to another IRS form.
Once you fill these out, you should wait for the response from IRS. Keep in mind that getting the approval from the IRS may last up to a year. It is important to know that for applying for the tax exemption program, your organization should have a valid Employer Identification Number (EIN). In those cases, if your organization cannot provide an EIN, you should obtain it as soon as possible.
We realize that all of this seems tricky and complicated. And that is why we advise you to reach out to us at Prestige Auditor, where we will assist you in collecting all the necessary paperwork for getting both an EIN, and tax-exemption status for your business.
We are here to help businesses with tasks that otherwise seem too daunting to process on your own. We are not your cookie-cutter firm. Our team benefits from professionals who are skilled in sales tax exemption, business formation, ITIN acquisition, and every other service which might be beneficial to a business. Book a call with us today to talk more about what we can do for your business! Tax exemption is possible in a lot of states, for example Kansas, where you should also conduct a Kansas business entity search before going forward with your business!