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Tax Deductions Blog

It is Now EZier for Charities to File for Tax Exempt Status

Authored by Melissa S. Kampmann
Posted on July 2, 2014
Filed under Tax Deductions

On July 1, 2014, the IRS introduced the new Form 1023-EZ which is a shorter application form to help smaller charities apply for tax exempt status. The standard Form 1023 is a 26 page form that charities must complete in order to obtain tax exempt, or 501(c)(3), status with the IRS. The standard form can be confusing for some individuals to complete without the assistance of an accountant or attorney. The Form 1023-EZ is only three pages long and is much more simple and concise than the standard form. It is estimated that as many as 70 percent of new applicants will qualify to use the new form.

In order to qualify as a "small charity" permitted to use Form 1023-EZ, the organization's gross receipts may not exceed $50,000 in the current year, the previous three years, or the next two years. In addition, the organization's total assets may not exceed $250,000. Most organizations that meet these two tests may apply for tax exempt status using Form 1023-EZ. However, before a charity completes the Form 1023-EZ, it must first complete the Form 1023-EZ checklist to ensure that it qualifies to use the consolidated form as there are various criteria that must be met in addition to the financial tests.

We view the new Form 1023-EZ as an important step forward for charities. It is estimated there are more than 60,000 Form 1023 applications sitting with the IRS and the new form should help speed up the examination process so that charities can conduct their important work.