A proposed new “EZ” application form for 501(c)(3) tax-exempt status would reduce the effort needed to complete and speed processing time, according to the IRS. The newly released Draft Form 1023-EZ (Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) may be used if an organization applying for tax-exempt status meets certain criteria.
The streamlined form goes from 23 pages down to only two. The less burdensome Form 1023-EZ created by the IRS comes as a result of a considerable backlog and fewer resources to process the requests. Form 1023-EZ will continue to provide the IRS with information to determine the organization’s exempt and private foundation status. If the form is accepted, a letter will be issued that provides written assurance about the organization’s tax-exempt status and its qualification to receive tax-deductible charitable contributions.
Most small exempt organizations will be eligible to use the Form 1023 EZ, the IRS says. Organizations that would normally file Form 1023 will be able to file Form 1023-EZ if they meet the following requirements: revenues of less than $200,000 and total assets are less than $500,000.
The IRS receives about 60,000 applications for tax exemption each year, according to the 2013 annual report of its Taxpayer Advocate Service (TAS). About 80 percent of those are applications for 501(c)(3) status.
The longer Form 1023 is currently 25 pages and takes 101 hours on average to complete. The IRS estimates that approximately 17 percent of 501(c)(3) applicants each year will be able to use the shorter form, which it says will take about 14 hours to complete.
The IRS hopes to have the new form available for use by eligible charities by the summer of 2014.
UPDATE: Form 1023-EZ is available here. Instructions for using Form 1023-EZ are here.