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Wednesday, April 14, 2021
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Form 1023-EZ

Form 1023-EZ debuted last July, when the IRS introduced the much smaller (3 page!) application form to the nation.  The purpose of the new form is to make it easier for small charities to apply for 501(c)(3) tax-exempt status.

The IRS estimates that Form 1023-EZ will take around 20 hours to prepare, compared with the 100+ it estimates for the standard Form 1023.  The IRS expects that as many as 70 percent of all applicants will be able to use the new form– companies that expect to have gross receipts of $50,000 or less (and assets of $250,000 or less).  If that’s your group’s financial profile, you’ll want to give this form a closer look.

The EZ version of the Form 1023 is a long time coming.  Before now, the little $20,000/year gardening charity had to go through the same lengthy application process as the $100 million/year cancer research group.

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Not everyone was happy to hear about the announcement.  Some critics say the number of illegitimate charities sure to get by the easier process will increase the need for the IRS to police the charity industry.  But that’s not necessarily bad, for two reasons:

First, at the time the announcement was made, the IRS had a backlog of over 60,000 501(c)(3) applications pending review, and way too many of them were waiting as long as nine months for approval.  Streamlining the process for the smaller charities will help reduce the backlog and the wait time.

Second, putting more emphasis on compliance activity at the back end can’t possibly hurt the industry.  Freeing up resources that will allow the IRS to make sure charitable organizations are really doing the work they say they will be doing will only be a bother to those who are either not operating according to their charters, or not concerned with keeping the documentation to prove it.  Either way . . .

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The new EZ form has to be filed out online.  To find out if your organization is eligible, the instructions contain an eligibility checklist that must be completed before form can be filed.

And yes, you guessed it–  filling the form out online also means paying online, and the $400 user fee is due at the time the form is submitted.

For those of you who are more adventurous, you can get more details on the Form 1023-EZ application process in the Revenue Procedure 2014-40, on IRS.gov.

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