Navigating the IRS Maze

Most of us are a little intimidated by the IRS. Up and coming social change agents are no exception. Most folks who want to start a new non profit look forward to tangling with the IRS about as much as they look forward to a trip to the dentist!

But there's no way around it. To get 501c3 status--the IRS classification for most public benefit organizations--and the tax exemptions that come with it requires navigating the IRS maze. And since 9/11 the process has become more rigorous.

We've found, though, that with a little help the process of gaining official federal recognition as a non profit can be relatively painless and inexpensive.

The biggest challenge is describing your new non profit in a way that fits with IRS non profit guidelines and helps the people at the IRS to understand clearly what you're trying to do. When non profit applications are turned down by the IRS--as they often are--the problem is almost always a poorly thought through mission plan and a poorly articulated explanation of that plan.

The second biggest challenge can be the legal community offering their services to help you gain non profit status. Unfortunately, many new social entrepreneurs end up unnecessarily paying many thousands of dollars for that help. Or they decide to cut corners and end up getting turned down by the IRS. Or, intimidated by those fees, they sometimes give up on following through on their passion. In our experience only the most complicated or controversial non profit proposals require a lawyer--or a lawyer's fees.

We're ready to help you think through your mission and organizational structure and ready to help you write it up in a way that will make sense to the IRS. Then we'll help shepherd your application through the often extended process with the IRS. We can interact with the IRS on your behalf or coach you so you can do so successfully. Often, success with the IRS is a matter of patience and perseverance in explaining what you want to do and supplying the necessary documentation when asked.

Our experience incorporating Visions Made Viable is a good example. Though our staff has collectively started many non profits, the concept of a fiscal and legal sponsorship organization like VMV is relatively new. It turned out that the IRS agent handling our case in Atlanta was unfamiliar with fiscal and legal sponsorship. So after waiting many months for a response we received a sharply worded letter questioning the legal legitimacy of what we were trying to do and demanding extensive additional documentation. We were told if we didn't get that documentation to our case worker in two weeks our application would be turned down.

An inexperienced social entrepreneur might have given up at that point, or turned to a lawyer for emergency help. But we knew we would be successful if we helped explain the concept of legal and fiscal sponsorship to our IRS contact. We spoke to her multiple times on the phone to answer her questions, compiled a long list of legal opinions demonstrating the legal basis for VMV, and supplied her with references from leading legal and fiscal organizations endorsing VMV. Just a few weeks later we received our IRS tax exempt status. No lawyers--or lawyers' fees--were involved at any step along the way.

So if you're somebody who wants to make a difference by creating your own non profit, and you want to succeed without paying lawyers' fees, get in touch with us. We'd be glad to help.