Well the IRS just released a new form 1023EZ. This is the form that certain smaller nonprofit start-ups will need to file to get tax exempt status. Imagine that, the IRS looking to streamline processes, instead of looking to make things more difficult. In order to qualify, a nonprofit will need to have (or project having) all of the following:
- Annual gross receipts of $200,000 or less, and
- Total assets of $500,000 or less, and
- Qualify as a private foundation or publicly supported public charity (i.e. be a 501(c)(3) organization).
Organizations that are looking to have their exempt status reinstated after revocation by the IRS for failure to file annual returns for 3 consecutive are permitted to use Form 1023-EZ.
So what does this mean for smaller nonprofit organizations? The full 1023 application is 12 pages long, includes 8 supporting schedules, and is estimated by the IRS to take in excess of 100 hours to complete. So you can understand why this left many a small agency dazed and confused. In addition, the review and approval process by the IRS on the 1023 is extensive, and it currently takes anywhere between 9 and 18 months to receive tax exempt status. The new 1023EZ does not require as much support and documentation, relying more on taxpayer attestation to the fact that they are meeting the organizational and operational tests for tax-exempt status. As a result, the form has been streamlined down to 3 pages and 22 questions, and the IRS estimates it will only take 14 hours to complete.
Nicholle Mezier, CPA, MBA
Nicholle is a Manager of Cerini & Associates’ audit staff where she brings experience in audit, review, and consulting services to our general business, nonprofit and special education clients. Nicholle has worked with a large number of nonprofit clients, predominantly focusing on social service providers, healthcare providers, foundations, educational institutions, and arts and culture organizations. Nicholle’s technical knowledge allows her to provide specific services, including financial statement audits, internal and claims audits, and nonprofit outsourced accounting services. Nicholle has also contributed to the firm’s various newsletters.