The IRS has just made it easier for small organizations to apply for tax-exempt status. Earlier this July, the IRS released the new 1023-EZ form to help small charities more easily apply for tax exempt status under 501(c)(3). The new form is only three pages and substantially shorter than the much longer 1023 form that large or complex organizations will still be required to complete. The new form will help speed the application of small charities and reduce lengthy delays for small tax-exempt groups. Currently, the IRS is facing a backlog of 60,000 applications with some of the applications pending for over nine months. Hopefully, this will allow small groups to focus on their important work and allow the IRS to focus on larger complex organizations. Previously, all organizations had to complete the same application process regardless of size, which created long delays for some groups and was contrary to the interests of both the public and the IRS. Generally, organizations such as schools, hospitals, universities, insurance organizations, and other complex institutions will not be eligible to submit the 1023-EZ form and must instead use the normal 1023 form. And, while nearly all organizations will be required to fill out either the 1023 or the 1023-EZ, there are two exceptions. Churches and associated auxiliaries are considered tax exempt under 501(c)(3) even if they do not submit either form. Organizations that have gross receipts less than $5000 are also exempt from filing requirements. If you have any questions feel free to contact your tax attorney.
Most organizations, and as many as 70% of applicants, qualify to use the new form. To be eligible, your organization must have gross annual receipts of less than $50,000 and possess less than $250,000 in assets. If you file within 27 months of when your organization was legally formed, then your tax exemption will then begin on your date of legal formation. If that time has elapsed then the tax-exempt status will begin on the date of the application submission. If the 27 months have elapsed, you can still request an exemption by sending the IRS your name, explanation, and any supporting documents. See the 1023-EZ checklist for the full list of exclusion criteria. When you submit your application, you will be required to pay $400 in application fees to pay .gov. Payments can be made directly from your bank account or with a credit/debit card. If you require assistance or have questions please contact your tax attorney at 913-735-4829
For more information call your Kansas City Tax Attorney, Jeffrey R. Siegel as soon as possible.