Applying for Tax-Exempt Status Easier with New Form

August 14, 2014

To apply for tax-exempt status, a nonprofit organization now has to fill out only a three-page form – instead of a 26-page one.

In July, the IRS introduced the shorter application Form 1023-EZ to help smaller charities apply for 501(c)(3) tax-exempt status more easily. To be eligible to use the streamlined form, a nonprofit organization cannot have gross receipts of more than $50,000 or assets of more than $250,000.

Up to 70 percent of all applicants would qualify to use the new streamlined form.

“Previously, all of these groups went through the same lengthy application process – regardless of size,” said IRS Commissioner John Koskinen. “It didn’t matter if you were a small soccer or gardening club or a major research organization.

“The change cuts paperwork for these charitable groups and speeds application processing so they can focus on their important work,” he said.

Currently, there are more than 1 million 501(c)(3) organizations recognized by the IRS.

There are more than 60,000 501(c)(3) applications in backlog at the IRS, many of which have been pending for nine months. The change will allow the IRS to speed the approval process for smaller groups and free up resources to review applications from larger, more complex organizations.

The IRS refined the 1023-EZ proposal after receiving feedback from charitable groups and tax accountants this spring. The changes include revising the $50,000 gross receipts threshold down from an earlier figure of $200,000.

The new EZ form must be filed online. Applying organizations must complete an eligibility checklist before filing the form.

To file Form 1023-EZ, you must use pay.gov. There is a $400 user fee that is due at the time the form is submitted.

For more information on the new form or the application process, go to www.irs.gov and search for Revenue Procedure 2014-40.