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Filing Application for Tax Exemption - Form 1023 or 1023EZ

Filing Application for Tax Exemption - Form 1023 or 1023EZ

When your organization is ready to apply for tax-exempt status, there are two applications available – Form 1023 or Form 1023-EZ.

  • The original long Form 1023 is composed of 40 pages and requires detailed information about your organization.
  • The shorter Form 1023-EZ is only three pages long and requires brief information about your organization. The caveat here is the restrictions on who can use this shorter form.

(Download Video Transcript)

What You Need to Know About Form 1023-EZ

To determine if you are eligible to file the Form 1023-EZ, you must complete the Form 1023-EZ Eligibility Worksheet which is included in the IRS's Instructions for Form 1023-EZ.

The form includes 30 “yes or no” questions and if your organization answers “yes” to any of the questions, it is required to file the standard Form 1023.

Before you begin the eligibility worksheet, here are a few things you should know:

  • There are some organization types that are not eligible to use Form 1023-EZ including churches, schools, colleges, universities, hospitals, agricultural research organizations, health maintenance organizations, and accountable care organizations.
  • The organization’s annual gross receipts cannot exceed $50,000 for the next three years.
  • The organization’s total assets cannot exceed $250,000 in fair market value.
  • The organization must be founded in the United States.
  • The organization must be registered as a corporation, unincorporated, association, or trust. Entities formed as limited liability companies (LLC) are not eligible to file Form 1023-EZ.
  • The organization cannot have donor-advised funds.
  • The average processing time for Form 1023-EZ is about 2-4 weeks. By contrast, processing time for Form 1023 can take between 3 and 6 months and may take up to a year.

Along with the restrictions presented, be sure that your organizing documents are properly drafted to avoid jeopardizing the application. For example, be sure you have an appropriately defined tax-exempt purpose.

It is always best to work with an experienced advisor to complete either Form 1023 or Form 1023-EZ. Your advisor will help you determine which filing option is best for your organization.

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Biz Tip Topic Expert: Lynn Heslinga, CPA

Lynn Heslinga, CPA

Lynn is a Principal with SVA Certified Public Accountants with focused expertise in nonprofit and real estate industries. In her role, she oversees and performs audits for owners of affordable multifamily housing units receiving Section 42 Low-Income Housing Tax Credits. Lynn also provides traditional audit, accounting, and tax services for nonprofits as well as advising nonprofit organizations on board governance, public charity status and public support test, internal control matters, and unrelated business income.

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