May 2020 Client Profile

Henry’s mother died of pancreatic cancer, and he is looking into starting a foundation named in her honor to fight this terrible disease. He hopes that compliance and tax filing won’t become a burden. Is there a simpler solution?

What a wonderful gesture on Henry’s part. First, he should consult an attorney and a tax professional. Both should be experienced working with not-for-profit groups. They can help him set up the foundation, file for tax-exempt status and complete the paperwork necessary to become an IRS non-profit entity.

If he wants to start on his own, he could apply online for Section 501(c)(3) tax-exempt status with the IRS’s revised Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. This year is the first year he can apply online, which the IRS says will help with application processing time. He may also enjoy a newly reduced excise tax, depending on the setup.

If Henry qualifies, he could fill out Form 1023-EZ to save time. Ultimately, the size and scope of Henry’s foundation will determine the level of compliance needed.

Client Profile is based on a hypothetical situation. The solutions we discuss may or may not be appropriate for you.