IRS Announces New Form 1023 – EZ for Certain Non-Profits to Use to Obtain Tax Exempt Status

by Sara Jacobi, CPA – Director

  Print Version

The IRS has recently announced the availability of the new Form 1023–EZ Application for Tax Exempt Status, which is welcome news for many small, newly formed non-profit organizations. For organizations that qualify to use the 1023–EZ, the burden of completing a long, often difficult to understand form was overwhelming for the average person to do on their own, and costly to obtain professional assistance to complete. The 1023–EZ was introduced to eliminate the cumbersome application process for small non-profit organizations. The IRS has stated it would rather eliminate the time spent on the front end qualifying organizations for tax exempt status and put that time to use enforcing compliance activity to ensure that tax exempt organizations are actually carrying out their stated tax exempt purposes. The IRS has acknowledged there are significant backlogs in processing the Form 1023’s received, often resulting in organizations waiting upwards of a year to receive notification of their tax exempt status. The IRS is hopeful with the simpler form that the application process can be streamlined and organizations receive their tax determination letters much sooner.

The new Form 1023–EZ is only three pages long, opposed to the 26 page full Form 1023. The application must be completed online and a $400 user fee applies. Only certain organizations qualify to use the Form 1023–EZ. To qualify, the organization generally must have expected gross receipts of less than $50,000 annually and expected total assets of less than $250,000. The instructions to the new form contain a checklist (click here to access) that helps users identify whether they can use the EZ version of the application or if they must use the long form. The IRS estimates that up to 70% of all applications submitted will be eligible to use Form 1023–EZ.

While this is certainly welcome news for many small non-profit organizations, it is still worth a newly formed organization’s time and money to meet with their trusted advisor to ensure that they are indeed eligible to file Form 1023–EZ and that the entity is structured appropriately to avoid compliance issues in obtaining or maintaining tax exempt status. Our team of Blue non-profit specialists would be happy to meet with you to discuss these matters.