Posted on Wednesday, October 08, 2014
The IRS released a new, easier Form 1023 this summer.
Now most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible to apply for tax-exempt status by filing Form 1023-EZ. Previously, all organizations wishing to file for 501(c)(3) tax-exempt status had to complete the same filing application, regardless of size. The application process is a long process with many organizations waiting for more than 9 months to receive their exemption. The use of the new Form 1023-EZ will hopefully speed up the process for smaller organizations.
There are some restrictions on the type of organization that can file the new form. The IRS has released a list of 25 organizations that are not eligible to file Form 1023-EZ and must file Form 1023 for 501(c)(3) exemption. Some of the more common types are:
- Organizations with projected annual gross receipts of more than $50,000 in either the current taxable year or the next 2 years.
- Organizations with annual gross receipts that have exceeded $50,000 in any of the past 3 years.
- Organizations with total assets the fair market value of which is in excess of $250,000.
- Organizations that do not have a mailing address in the United States.
- Organizations that were previously revoked or that are successors to a previously revoked organization (other than an organization the tax-exempt status of which was automatically revoked for failure to file a Form 990 series return or notice for three consecutive years).
- Schools, colleges and universities
- Private operating foundations
The new form is only 3 pages compared to 12 pages plus any required schedules of the original Form 1023. Questions include general information about the organization (name, address, phone, employer identification number, year-end), officers, organizational structure, specific activities, and foundation classification (sources of support). Unlike Form 1023, the 1023-EZ does not request financial data or copies of organizational documents.
There are a few requirements for filing the new Form 1023-EZ.
- It must be completed online.
- It must be filed using pay.gov and a $400 filing fee is due at the time the form is submitted.
- An eligibility checklist must be completed before filing the form.
The IRS has also released an interactive guide online in an effort to make Form 1023 easier to complete. The form is still required to be filed on paper but by following the guide, organizations required to file Form 1023 can ensure they have everything needed to correctly complete the application.
Posted by: Carrie Minnich, CPA
Posted in Mission Minded Nonprofits
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