[US] Frequently asked questions about 501(c)(3) businesses

What is a 501(c)(3) business?

501(c)(3) businesses are non-profits, associations and groups that include churches, social clubs, civic leagues, and other groups organized and operated exclusively for religious, charitable, educational, or other specified purposes. These organizations must meet certain other requirements under the Internal Revenue Code Section 501(c)(3):

"Payments for services performed by an employee of a religious, charitable, educational or other organization described in section 501(c)(3) that are generally subject to FICA (Social Security and Medicare) taxes if the payments are $100 or more for the year, are not subject to FUTA (unemployment) taxes."

Read more about section 501(c)(3) organizations.

Do I need to apply for section 501(c)(3) status?

Most organizations need to apply for recognition of section 501(c)(3) status with the IRS. Learn more about the application process and whether you need to apply on the IRS's website.

When does my business become exempt from Federal Unemployment Taxes?

When the IRS confirms your organization's 501(c)(3) status, your organization is exempt from Federal Unemployment Taxes and won't be required to file the annual Form 940.

Do I need to make changes in Wave when I become exempt?

When the IRS confirms your organization's 501(c)(3) status, you are responsible for contacting Wave, to ensure that your exemption is properly applied. To do so, follow the instructions in [US] Mark your business as Federal Unemployment Tax (FUTA) exempt.