In 2014, the IRS launched the Form 1023-EZ Application process enabling nonprofits to self-certify their own 501(c)(3) status. The form created a streamline method for applying for 501(c)(3) tax exempt status and is accessible at www.pag.gov. Nonprofits who qualify no longer have to undergo an intense application process which takes months to complete. Read on to learn more about the Form 1023-EZ application process for nonprofit tax exempt organizations.
What is a Form 1023-EZ Application?
Form 1023-EZ Application is a shortened process used to apply for recognition as a tax-exempt organization under Section 501 (c)(3). The form was designed primarily for small nonprofit organizations. The Form 1023-EZ Application is best suited for startup nonprofits and for established nonprofits whose income mostly comes from a combination of donations and program related activities. The form is 3 pages long compared to the 26-page Form 1023. Most small organizations are eligible to use the form and it also has a reduced filing fee of $400.
Who Can File Form 1023-EZ?
Not all startup nonprofits are eligible to use the Form 1023-EZ Application. Organizations with gross receipts of $50,000 or less each year for the first three years of business and assets of $250,000 or less can file Form 1023-EZ. In addition, to qualify to use Form 1023-EZ, the nonprofit cannot be organized under the laws of a foreign country or have a primary mailing address in a foreign country. In addition, nonprofit organizations cannot have any of the following criteria if seeking 501(c)(3) tax exemption using the Form 1023-EZ Application:
- Organized as an LLC
- A successor to or controlled by an organization which has had its tax-exempt status revoked or who has connections with terrorists
- A successor to a for-profit entity
- A successor to an organization that has had its 501(c)(3) status revoked because it failed to file Form 990 for 3 consecutive years and is seeking retroactive reinstatement
- A nonprofit organization that is seeking status as a private operating foundation
Form 1023-EZ Instructions
Instructions on how to complete Form 1023-EZ can be found on the IRS website. If you answer yes to the items listed on the form (items 1-25), your nonprofit will not be eligible to apply for tax exemption under section 501(c)(3). For example, if your nonprofit’s annual gross receipts exceed $50,000 in the past 3 years, your nonprofit will not be eligible for tax exempt status pursuant to Form 1023-EZ. In addition, if your nonprofit is a successor to a for-profit entity or requesting classification as a supporting organization under section 509(a)(3), it will not qualify for tax exempt status under Form 1023-EZ. The list of questions is quite long, yet much simpler than the extended 26 page Form-1023.
Pitfalls of Using Form 1023-EZ
There are certain pitfalls of using the Form 1023-EZ Application process. First, if a filer fails to meet the requirements for 501(c)(3) status, it may later be revoked by the IRS. Applicants must make sure that their governing documents contain language about their business purpose, proper dissolution language, and private foundation prohibitions. These provisions are crucial and can easily be excluded. In addition, nonprofits must make sure they are eligible to file Form 1023-EZ. In addition, filers should make sure they meet the monetary thresholds associated with eligibility.
Using Form 1023-EZ To Reinstate After Automatic Revocation
Only organizations applying for reinstatement under sections 4 or 7 of IRS Revenue Procedure 2014-11 (Rev. Proc. 2014-11) may use the Form 1023-EZ. If the organization is applying for reinstatement under sections 5 or 6 of Rev. Proc. 2014-11, a full Form 1023 must be completed.
Section 4 of the IRS Revenue Procedure addresses the process of streamlined retroactive reinstatement of tax-exempt status for small organizations within 15 months of revocation. This section provides guidelines on how a nonprofit can have its 501(c)(3) status reinstated after failing to file its Form 990 for 3 consecutive years. Section 7 addresses the reinstatement of tax-exempt status from postmark date.
Is An Attorney Required To File Form 1023-EZ?
Nonprofits do not need to hire attorneys to file for tax exempt status using the Form 1023-EZ Application process. Hire an experienced legal document assistant for help. With over 35 years of experience, A People’s Choice is a great low-cost option for your nonprofit documents. We can prepare Form 1023-EZ on behalf of your organization and can provide you with follow-up information that you will need to file on an annual basis to keep up your tax exempt status. Contact us for more information.