IRS 1023 EZ

On July 1, 2014, the IRS announced its new IRS Form 1023 EZ. This form is designed to ease and expedite the application process for small organizations which project $50,000 or less in income and assets of less than $250,000 during their first three years of operations.

To file an applicant must pre-qualify by answering 17 questions. If qualified an applicant will submit the application online and pay an electronic application fee of $400.00 after establishing an account on pay.gov.

For the past three years (2011-2014) I served as a member of the IRS Advisory Committee on Tax Exempt and Government Entities (ACT).  During 2011-12 we reviewed the IRS 1023 application process and issued recommendations in our June 2012 annual report.   While the committee recommended the IRS continue to use the Form 1023 application, four of the report’s core recommendations were:

1. the IRS should expedite the internal processes and commit the necessary resources (human, financial, and technical) to transform Form 1023 to an interactive Web-based Form e-1023 that can be filed electronically and stored, transmitted, and disseminated in an electronic database format; and

2. the IRS should redesign the Form 1023 with four primary objectives: to make the form (i) effective at identifying whether organizations meet the requirements for recognition of exemption; (ii) consistent with the structures and definitions of Form 990; (iii) simple by using a short core form with supplemental schedules that will ease the filing burden on small and/or less complex organizations; and (iv) educational by organizing questions based on substantive exemption requirements and including explanatory information. ***

5.  the IRS should carefully examine recurrent complaints about the Form 1023 filing and review process and take appropriate and expeditious steps to improve the effectiveness, efficiency, and timeliness of that process; and

6. the IRS should expand its use of the Review of Operations (ROO) program (to follow up on Section 501 (c)(3) organizations whose 1023 forms indicate potential future compliance issues), and should consult with state charity regulators regarding indicia that may warrant such follow-up.

The Form 1023 EZ is the second form which the IRS released following this report.  The first was last year’s introduction of the Interactive Form 1023.

Finally, the IRS continues to review and revise its application process in the Cincinnati office.  The IRS will rely upon the ROO as the primary means to follow-up and check on the nonprofits which avail themselves of the Form 1023 EZ application process.

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About Marty Martin, JD MPA

Marty Martin, JD MPA, Martin Law Firm, Raleigh, North Carolina, provides legal, tax, and training services related to nonprofit, tax-exempt, and social enterprise organizations serving local, regional, state, national, and international constituencies. He works with them throughout their lifecycle including start up, operations and management, board governance, merger, and closing down. He is an instructor with the Duke Nonprofit Management, Intensive, and Advanced Certificate in Nonprofit Leadership programs. He is a BoardSource Certified Governance Trainer. Martin is affiliated with North Carolina State University's Institute for Nonprofits. Martin served for three years on the IRS Advisory Committee for Tax Exempt and Government Entities ("ACT"). He was awarded the IRS TEGE Commissioner's Award which "is the highest honor of the Tax Exempt and Government Entities Division, and the highest honor we can personally bestow" for his service. He received a Master in Public Administration (MPA) degree with a concentration in managing nonprofit and public sector organizations from the Harvard Kennedy School and Juris Doctorate (JD) degree from Western New England University School of Law. He completed advanced training in nonprofit organizations from: Harvard Business School's Initiative on Social Enterprise; Harvard Kennedy School's Hauser Center for Nonprofit Organizations; Duke University's Nonprofit Management Program; Center for Creative Leadership; and BoardSource.
This entry was posted in Advisory Committee on Tax Exempt and Government Entities (ACT), Exempt organization, IRS, IRS Forms, Nonprofit Organizations, North Carolina Lawyer for Nonprofits, Starting a Nonprofit, Tax, Tax exempt organization and tagged , , , , , , , , , . Bookmark the permalink.

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