After deciding that you need 501(c)(3) tax exempt status. it’s time to apply. There are two paths to the application process: IRS Form 1023, and IRS Form 1023-EZ If you are NOT a church, school, hospital, medical research company or a foreign organization, AND if your total projected annual gross income is less than $50,000 per year, you might be able to qualify for exemption using Form 1023-EZ. If you ARE one of those entities OR if you expect to have more than $50,000 in gross yearly receipts, you’ll have to use the much more comprehensive Form 1023.
The Work
According to the IRS, both on its website and in the instructions, that Form 1023 will take more than 100 hours to complete. The Form 1023-EZ is estimated to take 20 hours plus.
Whichever path you take, now is the time to decide whether to “make or buy”– that is, “make” the application yourself, or “buy” the services of someone else to prepare it.
Fill it out Yourself
If you decide to fill out the application entirely on your own, make sure you spend the time necessary to carefully read through the instructions before you start the 100+ hours it will take. It is possible to do it yourself, but there is a reason professional preparers exist: Form 1023 takes real work.
If you prepare the application yourself, you should have it reviewed by someone who will look at it the way the IRS will look at it. Yes, there is a cost. People who do this for a living have families to feed, too. I charge $200 – $250 for application review, so you can save yourself a chunk of money by preparing the application yourself, then having it reviewed by someone like me. Just know, that a review (together with a listing of any problems with your application and suggested corrections, is all you’ll get. The additional work to be done fixing what’s wrong will be on you.
Using Online Preparers
Read the fine print. After you assemble the information and plug it into the online form, you push “send,” and a prepared document comes out. Just remember– you’re communicating with a software program. Be aware of the GIGO Rule: Garbage In, Garbage Out. The online tools will take what you give them and give you a result.
The rules are complicated. If you go with an online service, and the information you provide isn’t enough to convince the IRS, just know that once the completed application is done, the online service ends– whether you end up with a 501(c)(3) determination letter or not.
The online route will not include the additional work of editing and rewriting that almost always has to happen. It also will not include handling the follow-up requests for additional information or clarification that the IRS often makes.
Online preparers charge between $400 – $600.
Hiring a Professional
A human preparer can make sure that by the time you push that “send” button, everything necessary to complete the application is in place. Expect to pay an attorney or CPA between $2,500 and $5,000, for a Form 1023 (remember it could take up to 100 hours and more), and $400 – $800 for a Form 1023-EZ– even though you are in effect “self-certifying.”
Whether you “make” or “buy,” don’t forget the IRS User fee: $850 if your organization’s projected annual revenue averages $10,000 or more during the next four years, and $400 if projected annual revenue averages less than $10,000 during the next four years. This fee is nonrefundable, so if your application is rejected, you’ll have to fix it and resubmit.
Touch base with me and I’ll be glad to walk you through the process. My fees for a Form 1023 may be as much as 50% lower than what you’ve already been quoted. Over time I’ve developed my own systems for moving applications through the process. I’ve been working with this form since 1977. You should be able to handle the 1023-EZ form without any help. Just keep in mind that you still need other corporate documentation to be in place.
My fee includes preparation of the 1023 application, together with the required narrative, schedules, and financial projections. I’ll also prepare your Articles of Incorporation (for whatever state you’re in), and make sure the proper nonprofit language is included. Without the proper clauses, your application WILL be rejected.
Finally, I will prepare your organizational Bylaws to make sure they are “501c3 acceptable,” as well as the authorizing minutes of your official meeting of the corporation’s Board of Directors. You will need to file the necessary paperwork to get your Employee Identification Number.
I won’t go away until everything is done. I’ll continue working on your behalf, communicating with the IRS, until you get your 501c3 Determination Letter.
Contact me today– by email (kseraaj@gmail.com) or phone (407-770-4861).
