Great news for those seeking nonprofit status. The federal tax exempt status application, or Form 1023, has been streamlined!
Once upon a time, it was necessary for every applicant seeking 501(c)(3) nonprofit federal tax exempt status to fill out Form 1023 which is 26 pages long. Once all attachments, schedules and other materials are attached, it is common for these applications to exceed 50 pages.
Where to Find Form 1023-EZ
The new form, titled 1023-EZ, is available now. Interested applicants can find it on IRS.gov, fill it out, and file electronically. This is important to note, the 1023-EZ can only be filed electronically. The IRS estimates that as many as 70 percent of all applicants will qualify for the new streamlined process which includes the application that is only 3 pages long. Organizations with gross receipts between the amounts of $50,000 to $250,00 are eligible.
Why Form 1023-EZ Is Great
Avoiding the lengthy process will be especially beneficial to small groups. In the past small soccer clubs, dance troups and other volunteer-led organizations had to go through the complicated application. This is not only a burden on their time, it was using large amounts of IRS resources to process.
Feedback from the tax community who works with nonprofits prompted the IRS to take action and modify the process. At the time the 1023-EZ form was created, July of 2016, the IRS had more than 60,000 501(c)(3) applications backlogged with many of them pending for 9 months. The process was cumbersome for the applicants and the IRS.
Less is More
Another bonus to applicants is that the 1023-EZ user fee has decreased. The fee used to be $400 but on July 1, 2016 this fee was reduced to $275. This fee must be submitted through the www.pay.gov website when you file the 1023-EZ application.
The form may be called EZ but it is not necessarily easy. Instructions for filing are 21 pages long and should be followed very carefully. There is a lengthy eligibility checklist to help determine if 1023-EZ application is for you.
The IRS website is a great resource but if you have specific questions please consult with a tax professional.