IRS Streamlines Tax-Exempt Application Process for Most Charities

The Internal Revenue Service has recently released a new tax form to help small charitable organizations apply for tax-exempt status. Form 1023-EZ, introduced in July 2014, provides an alternative to the longer Form 1023 and will allow the IRS to more efficiently process applications for 501(c)(3) tax-exempt status.

From the IRS news release:

The new Form 1023-EZ, available today on IRS.gov, is three pages long, compared with the standard 26-page Form 1023. Most small organizations, including as many as 70 percent of all applicants, qualify to use the new streamlined form. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible.

"Previously, all of these groups went through the same lengthy application process -- regardless of size," [IRS Commissioner John] Koskinen said. "It didn't matter if you were a small soccer or gardening club or a major research organization. This process created needlessly long delays for groups, which didn’t help the groups, the taxpaying public or the IRS.”

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 while reducing the application backlog. Currently, the IRS has more than 60,000 501(c)(3) applications in its backlog, with many of them pending for nine months.

To determine if your organization qualifies to file the new form, review the Form 1023-EZ Instructions and Revenue Procedure 2014-40, as well as consult an attorney. Form 1023-EZ must be filed online and requires a user fee of $400.