Help for Small Organizations Seeking Tax-Exempt Status

By Penny Millar, CPA, Partner

The IRS released a new, simplified application for organizations seeking tax-exempt status, Form 1023-EZ. Recognizing the backlog of more than 60,000 applications, most of which are small organizations, this new form will greatly speed up the approval process. The original application is 26 pages plus multiple attachments. The new application is only three pages long, consisting of contact information for officers and directors, yes/no questions concerning the organization, and a declaration and signature. There is no need to submit financial information, organization documents, or supplemental information. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible.

The IRS believes as many as 70% of applicants will qualify for the simplified application. The application must be completed online by going to www.irs.gov/form1023. A fee of $400 is due with the application. Prior to submitting the 1023-EZ, all applicants must complete a seven-page questionnaire confirming eligibility for the shortened form. If you answer “Yes” to any of the questions, you are not eligible to apply for exemption using Form 1023-EZ, and you must use Form 1023.

If your organization was properly formed, and you meet the requirements of all non-profit organizations, the shortened application will enable you to receive tax-exempt status in a matter of weeks rather than months.