Many individuals want to know how easy it is to obtain tax-exempt status. About a month ago, you would have been told that the application process alone was rather lengthy. In fact, the standard Form 1023, which is the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, is 26 pages in length. On July 1, the Internal Revenue Service introduced a significantly shorter application form – Form 1023-EZ – which is just three pages long.
What Is Form 1023-EZ?
Form 1023-EZ is a simplified version of Form 1023 and its use is limited to organizations with gross receipts of $50,000 or less and total assets of $250,000 or less. The IRS says that 70 percent of new applicants should be able to use the new form, but to ensure that the right organizations are using the right form; the IRS has outlined factors that may disqualify larger organizations from using the new form. Be sure to read the instructions carefully.
The IRS says it currently has more than 60,000 backlogged 501(c)(3) applications. The new, streamlined application form is anticipated to speed up the approval process for smaller groups, which means the agency will have more resources available to review applications submitted by larger organizations.
What You Need To Know About The 1023-EZ Form
If you are planning to fill out the new EZ form, here are three things you need to know:
- The new EZ form must be filed online.
- A $400 user fee is due at the time the form is submitted and must be paid through pay.gov.
- Users must complete an eligibility checklist, which is included in the instructions for Form 1023-EZ, before filing the form.
Obtaining Tax-Exempt Status and Creating A Tax-Exempt Organization
The new EZ form makes it very easy to create a tax-exempt organization, but applicants should always seek professional assistance to ensure that their organization is operating, and will continue to operate, in accordance with their tax-exempt purpose.
Email Rea & Associates and ask if your organization qualifies to use Form 1023-EZ. Our team of business accounting and consulting professionals can answer your questions and guide you on your path to formally establishing your tax-exempt organization.
Author: Lisa Beamer, CPA (New Philadelphia office)