Form 1023 and 1023-EZ are both used for applying for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. They differ in complexity, eligibility requirements, and the organizations that can use them.
Form 1023:
This is the long-form application for 501(c)(3) status. It is more comprehensive and detailed, and it requires extensive information about your organization’s activities, governance, finances, and structure. Specifically, it asks for:
- A description of the organization’s mission and activities.
- Financial statements and projections (typically 3 years).
- Details about the organization’s governance and policies.
- By-laws, articles of incorporation, and other supporting documents.
The standard Form 1023 is required for most organizations applying for 501(c)(3) status, especially larger or more complex organizations. It can take a longer processing time (several months) because it requires the IRS to review a substantial amount of information.
Form 1023-EZ:
This is a streamlined, shorter version of the Form 1023 and is designed for smaller, simpler organizations. It is a 1-page form and requires significantly less documentation, making it faster and easier to file.
Who Qualifies for the EZ Filing?
The IRS has specific criteria for organizations to be eligible to use Form 1023-EZ. The key criteria include:
- Annual Gross Receipts: The organization must have projected gross receipts of $50,000 or less in each of the next 3 years. Additionally, the organization must not have had gross receipts exceeding $50,000 in any of the previous 3 years.
- Total Assets: The organization must have total assets of $250,000 or less. This includes all property and assets owned by the organization.
- Type of Organization: The organization must be a new organization or an organization that has been in existence for a limited time with simple operations (e.g., a small nonprofit with limited resources).
- Not a Church, School, or Hospital: Certain types of organizations are not eligible for Form 1023-EZ. These include churches, schools, hospitals, and supporting organizations.
- No Private Inurement: The organization must not have any arrangements that would result in private inurement (i.e., the organization’s profits benefiting any private individual or shareholder).
The IRS provides an eligibility tool to check if an organization qualifies. This tool helps you verify whether your organization meets the criteria for using the EZ form.
Key Differences:
- Complexity: Form 1023 is much more detailed, while Form 1023-EZ is a shorter, simplified version.
- Eligibility: Form 1023-EZ is only available to smaller organizations (with gross receipts under $50,000 and assets under $250,000) that meet certain conditions, while Form 1023 can be used by any organization, regardless of size.
- Processing Time: Form 1023-EZ is processed much faster than Form 1023, which can take several months to process.
If your organization qualifies for Form 1023-EZ, it is generally the preferred filing option due to the simplicity and speed of the process. However, if your organization does not meet the eligibility criteria, you’ll need to file the standard Form 1023.
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