IRS Form 1023-EZ

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IRS Form 1023-EZ

According to recent official research, over half of the companies which apply for Internal Revenue Code Section 501(c)(3) status do this by utilizing Form 1023-EZ. A report by TAS has underlined the problematic issues abounding in the form. Besides that, the information demanded from the applicants has been found insufficient to meet the modern legal requirements. The statistic shows that fewer people are using the form now compared to the last year.

Taxpayers’ rights are under the protection of the TAS, which is in charge of the identification of the issues and can initiate adjustments in matters concerning the administration of the IRS.

As to the new variant of Form 1023-EZ issued as of June 2014, the newly-released document represents a more simple way for a business in terms of the application following rules involving a Section 501(c)(3) company.

Considering the issues arising in many cases during the application for the form, it is recommended that you read our article and follow the instructions we present in the following chapters of the piece.

Organizational Test

Those companies that are on a pursuit after the exemption from taxes are obliged to undergo a test: it concerns a considerable amount of paperwork to be organized and distributed. The measure is initiated in order to discover if the applicant meets the requirements of Section 501(c)(3.) If the entity has its assets involved in charitable actions and is found organized in terms of purposes clause, there are no problems with passing the organizational test. Such measures promote the efficiency of the document circulation and embrace simplicity for the applicants.

What Is New About the Form?

Efficient as it is, the renewed document consists of two pages only. There are certain ways in which the new form is distinct from the predecessor:

  • Submitting the Incorporation and Bylaws is not mandatory.
  • A description of the required information in a form of a narrative is not required from the company.
  • The only mandatory thing in matters of private benefit or inurement is an attestation procedure.

However, there is a certain threshold a legal entity has to pass to be able to use the two-paged form. Among the reasons for such a disability is $250 000 worth of the company’s assets. Another one is $50 000 income for three consecutive years.

In some cases, the 990-N postcard is a mandatory condition for a company that applies for tax exemption using Form 1023-EZ. The former is aimed to verify if the applicant’s gross receipts do not regularly exceed $50 000.

Major Points

It must be noted that tax exemption is an opportunity that is given as a privilege to the companies that qualify for it. The test revealing the organizational readiness of the company to meet the requirements of the exemption is a great tool to provide clarity and simplicity to the process, as well as embrace efficiency for all parties. The new type of form 1023-EZ works best with the vetted full one, a procedure the IRS is responsible for. It also provides extra protection to the company and the community.

To embrace accuracy and confirm the legal effect of the paper, use the form-building software we provide on our website.

Eligibility Worksheet

Before a business entity embarks on filing Form 1023-EZ, they have to submit the eligibility worksheet, a questionnaire including 30 questions. The worksheet is aimed to indicate the form you need to submit, depending on the answers you give on the questionnaire. An entity is required to fill the sheet with accuracy and honesty.

Besides the worksheet, a company representative must fill out the data concerning the assets and gross receipts.

When To FIle the Form

A 27-month period from the end of the month of the company’s inception is recommended as appropriate to apply for the form. In case you fail to submit the form in the designated period, the document will be dated with the submission date. If you file the paper within the period, an earlier date can be requested: for this purpose, you should submit correspondence including your legal name, EIN, and the actual date of your request, let alone the explanation of the grounds of your request. Any other documents relevant to the matter will be of use.

The Process of Application

Although the form can be filled out correctly, there is no guarantee it will be of effect, let alone the cases when the form is insufficient or contains mistakes. You can be required to provide some additional data concerning your business to qualify for the form.

Mind that Form 1023-EZ must be filed in a digital form; printed copies are not accepted.

A person who has the authority to put their sign should do as they must and accompany the signature with the date and the title.

Other IRS Forms for Charities and Nonprofits

The Form 1023-EZ might be not the only one expected of your organization. Learn what other IRS forms might be required by the Internal Revenue Service.


How to Fill Out the Form

1. Identify the Applicant

In this section, an applicant should indicate the full legal name of their company, the address to establish a mailing process and the ID number of the employer. The number consists of nine digits. The EIN is a mandatory condition a company-applicant must meet.

After that, you should put in the month of the end of your tax year. To provide more security to the document development, you can indicate a person to contact should more info about the company be requested. Here you should leave a phone number, a fax number, the amount of the fee paid, and your directors, officers, and trustees listed out with their mailing information. Provide the official web page of the firm and its current email.

2. Indicate the Structure of the Company

Here is a list of plausible structures to indicate while filling out the form:

  • Corporation
  • Trust
  • Unincorporated Association

Indicate the date of the company’s formation and provide a required list of documents.

In this section, input the jurisdiction of the laws under which you were formed as a legal entity and the state of formation.

Add some information concerning the purpose clause we have discussed earlier in the piece and input the prove that no private entity or a shareholder should receive benefits from your earnings.

After that, an applicant has to deal with the dissolution clause that is aimed to be used in the future if the company is dissolved and controls the distribution of the assets of the company. Here, state laws come into play largely, so you should do research to find out more information about your state or county.

3. Provide Information About Specific Activities

Here is a list of steps to take:

  1. Describe the mission of the company you own and provide a list of the most noticeable steps you’ve completed.
  2. Input the NTEE code consisting of three digits if the donors are concerned.
  3. Indicate the purposes of exempt: charitable, religious, educational, scientific, etc.
  4. List out the activities prohibited for your organization.
  5. Answer if you have attempted to affect the procedure.
  6. Input info concerning the compensation to directors, officers, etc.
  7. Provide information about the individual donation of funds.
  8. Provide information about your activities outside the USA.
  9. Include info about money transactions involving directors, trustees, etc.
  10. Put in information about gross income, which is not related to business.
  11. Gambling activities are to be indicated here, planned, or finished.
  12. Indicate if you have a plan concerning relief in case of a disaster.

4. Provide Information About Foundation Classification

Whether you are a charity or a public foundation, this section must be filled out to ease the determination of the tax rules applicable to your individual case.

There are certain types of revenue that affect the choice of the governing tax rules:

  1. Gifts, grants, etc.
  2. Unrelated activities.
  3. Exempt-related activities.
  4. Investment revenue
  5. Special grants

Here is a list of revenue sources which are appropriate for the business to have while applying for the form:

  • Disqualified persons
  • Family members
  • General public
  • Governmental unit
  • Public Charity

5. Reinstatement

This step is required only if a company’s exempt status is revoked under section 6033(j)(1.) What matters during the reinstatement procedures is the size, number of previous revocations, etc.

6. Sign the Form

A person who has the authority to leave a signature on the document should do so to validate the form. It can be a director, officer, trustee, etc. Don’t forget to include the titles of the signer.

Note: the signature required for the purpose is to be electronical.