June 3, 2014

The IRS has released a draft of a shorter, less burdensome version of the regular Form 1023 – Form 1023-EZ – for organizations that plan to apply for tax-exempt status. It is not currently available for use.

When finalized, the two-page Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, may be used if an organization meets specific criteria. Organizations that would normally file Form 1023 will be able to file Form 1023-EZ if they meet all of the following requirements:

  • No more than $200,000 of projected annual gross receipts in any of the next three years
  • Annual gross receipts of not more than $200,000 in any of the past two years
  • Total assets not in excess of $500,000

Some organizations may be considered tax-exempt under Section 501(c)(3) even if they do not file Form 1023 or 1023-EZ. These include churches, synagogues, temples and mosques, integrated auxiliaries of churches and conventions or associations of churches, and any organization that has gross receipts in each tax year of normally not more than $5,000. However, the IRS cautions that, even though these organizations are not required to file Form 1023 or 1023-EZ to be tax-exempt, they may be liable for annual filing requirements.

If an organization files Form 1023-EZ within 27 months after the end of the month in which it was legally formed, and the IRS approves the application, the legal date of formation will be the effective date of its exempt status. If it did not file Form 1023-EZ within 27 months of formation, the effective date of its exempt status will be the postmark date when it filed Form 1023-EZ.

If an organization did not file Form 1023-EZ within 27 months of formation, and it believes it qualifies for an earlier effective date than the postmark date, it must file Form 8940 after it receives exemption to request the earlier date. Alternatively, it could complete Form 1023 in its entirety instead of completing Form 1023-EZ.

This article was originally posted on June 3, 2014 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at marketing@grfcpa.com.