Paul Mueller from Mueller & Associates, CPA, an EPNRC Community Give Back Partner shares his insights about the FORM 1023-EZ for organizations interested in applying for tax exempt status with the IRS. Look like this form may be valuable and less intimidating for smaller organizations. Read on for his professional opinion! Jill
“Up until recently, few things could be more intimidating to a newly-formed small charity than applying for tax-exempt status with the IRS. The Form 1023 used for this purpose is 26 pages long, asks for extensive narratives concerning activites and requires the attachment of voluminous exhibits. Once filed, the processing time from the IRS is typically 6 months or more, and that’s if the IRS doesn’t ask questions or raise any objections.
To help out smaller charities, the IRS recently issued a new form – 1023-EZ. Of course, anything the IRS labels as “EZ” has to be suspect, so we did a little digging.
The full name for the new form is, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. While the title by itself is somewhat scary, we found to our relief that the IRS is true to its word this time. The filing really is streamlined.
Rather than 26 pages, the new form is only three pages long. In addition, the new form does not go into exhaustive detail about the charity’s organization, activities or budgets. Even easier, the form is both prepared and filed online using www.pay.gov,, where you can also pay the $400 user fee with a credit or debit card or a bank account ACH. To us, it now appears the form can be completed in hours, rather than the number of days that applied to the Form 1023.
The 1023-EZ is, however, limited to smaller charities with:
- annual gross receipts projected to be no more than $50,000 in any of the initial three years, and
- total assets worth no more than $250,000.
Certain organizations such as churches, hospitals, schools won’t be allowed to use the 1023-EZ form, though, the IRS estimates that up to 70% of new charities will.
We applaud the IRS for this innovation. Anything that helps new charities engage with donors and assure them the tax deductibility of their donations makes good sense.” Paul Mueller
About Mueller & Associates CPA: The firm maintains offices in Loveland and Estes Park providing tax and accounting solutions to business owners, nonprofits and high-net worth families. Services to nonprofits include annual tax and regulatory filings, budgeting, board governance, strategic planning and policy development. www.mueller-cpa.com