What is IRS Form 1023?

If you are a U.S. taxpayer then in the process of tax preparation and filing you must have heard about IRS form 1023. If you have not heard about this form before then it is very obvious for you to have a few questions about this form. The questions that can come to your mind are like:

  • What is IRS form 1023?
  • How to complete IRS form 1023?
  • How to get a copy of IRS form 1023?
  • What are some important IRS form 1023 instructions?

Here we are going to discuss the IRS 1023 form in detail.

What is IRS Form 1023?

If you want to request exempt status under Section 501(c)(3) then you can use 1023 form IRS. The other name for this tax form is the Application for Recognition of Exemption. Nonprofit organizations can fill out this tax form to get exemption status.

If an organization wants to fill out the form 1023 IRS then it has to be organized and operated exclusively for charitable, religious, and/or educational purposes. And also the earnings of this organization should not go to any private shareholder or individual. Along with this, to qualify this organization should never try influencing legislation as a substantial part of its activities. It can also not be a part of any campaign activity for or against political candidates.

The organizations that are mentioned in section 501(c)(3) are charitable organizations. These organizations are eligible to receive tax-deductible contributions. Only  the ones testing for public safety are exceptions. 

If a particular organization is in compliance with the Section 501(c)(3) of IRS and also fulfill one or more of the eligibility points below then it can operate as a 501(c)(3) organization. And in such a case, that organization does not have to fill out the IRS Form 1023.

  • The organization has annual gross revenue less than $5,000.
  • Churches, temples, mosques and also synagogues.
  • Integrated auxiliaries of churches and conventions or association of churches.

If an organization is exempt from filing Form 1023 then it can still choose to file. This happens when the organization needs to obtain a determination letter from the IRS. It is because some donors need the determination letter in order to approve contributions and/or grants to exempt organizations.

You should fill out the Form 1023 within 27 months of your organization’s formation. Generally, you should start counting from the date on which the organization incorporated. The exempt status is retroactive to the date of formation.  After 27 months from the incorporation date, the exempt status is typically granted as of the postmark date on the Form 1023 application. 

While filing this form you will need:

  • A completed Eligibility Checklist
  • Articles of Incorporation with appropriate IRS-required provisions
  • Bylaws or other rules of operation
  • Federal EIN
  • A credit or debit card for payment

You May Also Read About: IRS Form 8832?

What is IRS Form 1023 ez?

There used to be some complaints about severe delays in approving exempt applications using Form 1023. So in July 2014, the IRS issued IRS Form 1023 ez. This form is for smaller organizations. And in terms of the process of filing also, it is easier and shorter as compared to the Form 1023. If you apply using IRS Form 1023-ez then the chances are high that you will get the approval within 6 to 8 weeks of filing. This form should be filed electronically only. To fill out you will have to pay a $275 user fee. You can use either a credit or debit card.

To qualify for this form, an organization must have gross revenue less than $50,000 and total assets value should be less than $250,000. Private Foundations are not eligible to fill out the form 1023 ez.

Eligibility for Form 1023 ez:

If your organization does not meet even one of the conditions that are mentioned below then you are not eligible to file Form 1023 ez. In such a scenario, you should fill out Form 1023 instead. 

  • Size: If the average annual gross revenue of your organization is less than $50,000, and the total asset value is less than $250,000 then you can fill out this tax form.
  • Organizational Structure: If your organization is a nonprofit corporation that was incorporated in either the United States or its territories. And the tax-exempt status organization cannot have been previously revoked. 
  • Activities: Certain organizations are subject to additional IRS scrutiny. If your organization is one of those then it is not eligible. 

Things to Remember about Form 1023 ez:

  • The IRS issued this new form as an alternative form Form 1023. The ultimate goal was to reduce a backlog of over 66,000 applications for recognition of exemption.
  • Organizations declare themselves to be compliant with IRS requirements, thus removing most of the scrutiny previously needed.
  • Some organizations that are eligible to file this form but choose not to do so. 
  • Just because the form is shorter and easier it does not mean that it requires any less preparation. 
  • It really has never been easier to obtain tax exemption. Make sure you understand your filing options, and choose the best method for your organization.

Is it possible to Use Form 1023 ez for Reinstatement after Having the Tax-exempt Status Revoked?

Yes it is possible in a few cases. If your organization is applying for reinstatement then you should consult IRS Revenue Procedure 2014-11. This is required to determine if you are eligible to file using Form 1023 ez. Generally, an organization that qualifies to apply for reinstatement under Sections 4 or 7 can use Form 1023 ez. 

Section 4 refers to:

  • Organization that was eligible to file either Form 990-EZ or Form 990-N for each of the three consecutive years that they failed to file.
  • Or the one that has lost their tax-exempt status for the first time.
  • Submit the application for reinstatement within 15 months of the date of the revocation letter or the date the IRS posted the organization’s name on the Revocation List – whichever is later.

Section 7 refers to:

  • An organization that is not seeking reinstatement retroactive to the date of revocation but, instead, is only seeking reinstatement as of the post-mark date of its application for reinstatement of tax-exempt status.

You May Also Read About: IRS Form 8821?

Wrapping Up!

If you want to request exempt status under Section 501(c)(3) then you have that option. For this you will have to fill out the IRS Form 1023. Here we have explained every important aspect of this tax form. 

If you have some confusion at some point in the process of filling the IRS Form 1023 then you should take help from some expert tax professional. We have a large team of dedicated tax professionals and we are just a call away. You can call us at +1-866-301-2307 We are available 24×7. 

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