To accept donations legally, you need to pick an organizational structure that fits what you’re raising money for, register with the IRS and any state where you’ll ask for contributions, open a dedicated bank account, and set up a compliant way to receive and acknowledge each gift. The specifics change depending on whether you’re building a formal nonprofit, borrowing another charity’s status through fiscal sponsorship, or collecting money for a personal cause. Getting the setup right at the start protects you and your donors and prevents tax problems that can surface years later.
Pick the Structure That Fits Your Purpose
The structure you choose decides how the IRS treats the money, whether donors get a deduction, and how much personal exposure you carry. Four arrangements cover almost every situation.
501(c)(3) Nonprofit
A 501(c)(3) is exempt from federal income tax, and donors can deduct their contributions on their own returns. In exchange, the organization has to operate exclusively for exempt purposes, none of its earnings can benefit a private individual or shareholder, and it can’t engage in political campaigning.1Internal Revenue Service. Exemption Requirements – 501(c)(3) Organizations You’ll also file an annual information return, which smaller groups sometimes find heavy.
Fiscal Sponsorship
If you want donors to get the deduction without building your own nonprofit, an existing 501(c)(3) can agree to accept donations on behalf of your project. The sponsor keeps legal control of the funds and makes sure they’re used for charitable purposes. Fees typically run between 5% and 10% of the funds held. This suits new projects, short campaigns, or groups testing an idea before committing to full nonprofit status.
Unincorporated Association
Small groups sometimes operate without filing incorporation papers. It’s simpler, but you won’t qualify for 501(c)(3) status, so donations aren’t deductible. Many states have laws clarifying that members aren’t personally liable just for belonging, but that protection doesn’t cover self-dealing or willful misconduct. If your group plans to handle real money, incorporating and applying for exempt status is usually worth the effort.
Personal Crowdfundingh3>
Raising money for medical bills, tuition, or emergency relief doesn’t require any organizational structure at all. Set up a campaign on a platform and receive funds directly. Contributions are generally treated as personal gifts rather than income when they come from donors’ “detached and disinterested generosity” with nothing expected in return.2Internal Revenue Service. Money Received Through Crowdfunding May Be Taxable Donors don’t get a deduction. The gift tax annual exclusion for 2026 is $19,000 per donor per recipient, so a single donor can give you up to that amount before any gift tax filing is triggered.3Internal Revenue Service. Frequently Asked Questions on Gift Taxes
Get an EIN and Open a Dedicated Bank Account
Any group accepting donations needs an Employer Identification Number from the IRS. This nine-digit number functions like a Social Security number for the organization, and you’ll need it to open a bank account, file returns, and apply for tax-exempt status.4Internal Revenue Service. Employer Identification Number The IRS issues EINs free through its online application, and you get the number immediately on approval. Skip the third-party sites that charge for what the IRS gives away.5Internal Revenue Service. Get an Employer Identification Number
With the EIN in hand, open a bank account that only holds donated funds. Banks will ask for your EIN, your articles of incorporation or bylaws, and a board resolution authorizing the account. Unincorporated groups without articles of incorporation should expect the bank to ask for an operating agreement or similar governance document. Mixing donated money with personal money is one of the fastest ways to create legal and tax problems, so this step isn’t optional.
Apply for 501(c)(3) Status if You Want Deductible Donations
If you’re going the full nonprofit route, apply for recognition of exempt status using either Form 1023 or the streamlined Form 1023-EZ. The user fee for Form 1023 is $600; Form 1023-EZ costs $275.6Internal Revenue Service. Form 1023 and 1023-EZ: Amount of User Fee The EZ version is available to smaller organizations that meet eligibility criteria, and it’s a considerably cheaper and faster path for groups just starting out.
Processing times differ significantly. As of early 2026, the IRS issues 80% of Form 1023-EZ determinations within 22 days. Applications flagged for additional review still typically resolve within 120 days. The full Form 1023 requires far more documentation and takes longer, with 80% of determinations coming within about 191 days.7Internal Revenue Service. Where’s My Application for Tax-Exempt Status During that wait you may get requests for more information on your planned activities or finances. Keep copies of every confirmation notice, since you’ll need them for future audits and renewals.
Register in Every State Where You’ll Solicit
Most states require organizations to register before soliciting donations from their residents, and this applies even when you have no physical presence in the state. Fundraising emails, online campaigns, and phone calls that reach across state lines can all trigger registration in multiple jurisdictions. Filing fees vary widely and are often tied to expected annual revenue, generally running from about $25 to several hundred dollars per state.
Multi-state registration is one of the biggest administrative burdens nonprofits face, and it’s the step new organizations most often underestimate. Many states also require annual renewals and updated financial reports. If you hire a professional fundraiser or solicitation firm to run campaigns for you, that firm often has to register separately and post a surety bond.
Set Up a Payment Platform
Once the legal pieces are in place, you need a way to actually receive money. Transaction fees vary, and they add up on a big campaign.
GoFundMe charges 2.9% plus $0.30 per donation for individual fundraisers and a lower 2.2% plus $0.30 for certified charities.8GoFundMe. Pricing and Fees PayPal offers discounted rates for verified 501(c)(3) organizations that come in below its standard business rates. Stripe, Square, and bank-hosted payment gateways each have their own pricing, so it pays to compare before committing.
When you set up an account, enter your organization’s legal name and EIN exactly as they appear on your IRS documents. Mismatches between your platform profile and government records are a common reason applications get delayed. You’ll also enter routing and account numbers so the platform can transfer funds to you. Write a clear, specific description of your fundraising goal, since vague descriptions deter donors and can violate platform terms.
After you submit, expect a short verification period. Most processors send micro-deposits under a dollar to your linked bank account; you check the amounts and report them back to confirm the connection. That usually takes two to three business days. Platforms also verify identity information against federal databases, which for individuals means confirming a Social Security number and address, and for organizations means confirming the EIN, legal name, and often the identities of officers.
Give Donors Proper Receipts
If your organization has 501(c)(3) status, you’re responsible for the written acknowledgments donors need to claim deductions. For any single contribution of $250 or more, the receipt must include the organization’s name, the amount of any cash contribution, a description of any non-cash property donated, and a statement about whether the organization provided goods or services in exchange for the gift.9Internal Revenue Service. Charitable Contributions: Written Acknowledgments If you did provide something in return, like a dinner, merchandise, or event tickets, the receipt has to include a good-faith estimate of that item’s value so the donor knows how much of the payment is actually deductible.
The Quid Pro Quo Rule
When a donor pays more than $75 and gets something of value in return, you have to provide a written disclosure telling them that only the amount above the value of what they received is deductible. Missing this disclosure carries a penalty of $10 per contribution, up to $5,000 per fundraising event or mailing.10Internal Revenue Service. Charitable Contributions: Quid Pro Quo Contributions Reasonable cause can excuse the penalty, but building the disclosure into your standard receipt template is far simpler.
Non-Cash Donations
Donors who give property face additional paperwork. Above a $500 deduction for non-cash contributions, the donor files IRS Form 8283 with their return. For property valued above $5,000, the donor generally needs a qualified appraisal, and your organization has to sign Section B of Form 8283 to acknowledge receipt.11Internal Revenue Service. Instructions for Form 8283 Art donations valued at $20,000 or more require the full appraisal to be attached to the return. One thing to watch: don’t assign a value to donated property on the receipt. Describe what was donated and leave valuation to the donor and their appraiser.
File Your Annual Return, Every Year
Tax-exempt organizations file an annual information return with the IRS. Which form depends on size:
- Form 990-N (e-Postcard) for organizations with gross receipts of $50,000 or less.
- Form 990-EZ for organizations with gross receipts under $200,000 and total assets under $500,000.
- Form 990 for organizations with gross receipts of $200,000 or more, or total assets of $500,000 or more.
The return is due by the 15th day of the fifth month after the end of your fiscal year. Form 8868 gets you an automatic six-month extension if you file it before the deadline.12Internal Revenue Service. Exempt Organization Annual Filing Requirements Overview
Miss three annual returns in a row and the IRS automatically revokes your tax-exempt status. This isn’t discretionary; it happens by operation of law under Section 6033(j) of the Internal Revenue Code.13Internal Revenue Service. Automatic Revocation of Exemption Reinstatement means filing a new application and paying the user fee over again. Even organizations small enough to only need the e-Postcard, which takes about five minutes, lose their status if they skip it three years running.
Know When Personal Crowdfunding Becomes Taxable
If you’re raising money for yourself rather than a charity, tax treatment depends on the nature of the contributions. Money given out of generosity, with nothing expected in return, is generally treated as a gift and isn’t taxable to you.2Internal Revenue Service. Money Received Through Crowdfunding May Be Taxable The IRS is also clear that crowdfunding contributions aren’t automatically gifts. If contributors receive something of value in return, or if the campaign looks more like a business transaction than a personal cause, the funds can be taxable income.
Payment platforms may report the gross amount they distribute to you on Form 1099-K. The reporting threshold is $20,000 in gross payments and more than 200 transactions in a calendar year.14Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill Receiving a 1099-K doesn’t automatically mean the reported amount is taxable; it just means the platform reported the payments. Keep detailed records of every contribution: who gave it, when, how much, and whether they got anything in return. If you offered rewards, perks, or products in exchange for backing, those contributions are more likely to be treated as income than gifts, and you’ll need the records to reconcile a 1099-K with what was actually taxable.