Perhaps the most defining aspect of the nonprofit organization is its tax-exempt status. Charitable organizations that are accessible to everyone are typically not responsible for local, state, or federal taxes.
This tax-exempt status does not mean that nonprofits do not have to file taxes every year. In fact, the tax laws for nonprofits are quite stringent, and to maintain NPO status, it is essential that each not-for-profit organization files correctly. However, once an NPO is registered and recognized as a 501(c)(3) organization, or nonprofit, by the Internal Revenue Service, all money brought into the organization stays with it until its dissolution.
It often takes a few years for the federal government to fully review all the NPO-status filings that flood their offices each year. As such, the wait to complete the process of becoming a recognized nonprofit can be as long as three full year-long tax cycles. During this time, it is a wise idea to utilize the talent and knowledge of a professional accountant. Donations from both NPO members and other organizations can be tax write-offs, but following protocol is essential to a legal business operation. Professional accountants can clarify some of the complicated tax issues that arise from new NPO tax exempt questions.
