The money you collect from individuals
for them will be considered as non-taxable gifts
. Thus, they do not have to report the gifts as income
However, donors may not automatically consider their contributions as tax-deductible
. Only contributions to qualified 501(c)(3) organizations are tax deductible.
If you want to set up an organization that qualifies as a 501(c)(3) you need to do several things.
The only way to be able to accept tax-deductible contributions is to qualify as a 501(c)(3) non-profit
entity with both the IRS
and your state
You will need to complete IRS Form
and any required schedules. The instructions for this form are at http://www.irs.gov/pub/irs-pdf/i1023.pdf
. If your expected revenues may exceed $5,000, there will be a $500 fee that needs to accompany the application.
Preferably, you should organize as a corporation with an exempt
purpose. You should engage an attorney who can draft your Articles of Incorporation and By-Laws
with the appropriate language. There may be a fee for incorporation as well as legal fees.
You will definitely need to register your organization with the MN Attorney General's office as a non-profit. See http://www.ag.state.mn.us/charities/charforms.html
. Once you are a 501(c)(3) for Federal tax
purposes, you do not need to file a MN information return
unless you have unrelated business yaxable income (i.e. your operating a business outside of your tax-exempt purpose).
Because it is impossible for me to identify and consider ALL the relevant facts, this advice is not intended or written to be used for the purpose of avoiding penalties, and cannot be used for that purpose.