Many people are aware that they need to file their annual 990 form at the end of the year with the IRS in order to keep their 501(c)(3) status. But did you know that you might also have to submit an annual report to your Secretary of State?
In order to become tax-exempt, an organization must file a Form 1023 or a 1023-EZ. In our previous blog “The difference between a 1023 and a 1023-EZ”, we discussed the difference between each. When filing a 1023, organizations must submit various legal documents and a narrative detailing the organization’s mission and programs, while organizations filing the 1023 EZ, simply check boxes to indicate those documents exist without having to submit them to the IRS.
A 501(c)(3) and a 1023 are not the same thing, but rather complementary of one another. Section 501(c)(3) is part of the Internal Revenue Code that describes how to become tax-exempt status and Form 1023 must be filed in order to achieve that status.
Do you remember getting back a paper that you totally bombed and you have no clue why? Even if the content was some of your best, if you did not check the syllabus, you could have miss the key points; you did not comply with the teacher’s expectations. In a similar fashion, nonprofits can lose their compliance when they do not meet the government standards. If the company does not maintain certain standards, their 501(c)(3) status can be revoked. It is crucial to fully understand all the different requirements for compliance to be able to maintain it.
The main difference between these two forms is the complexity of the information required. Many find the 1023 form to be tedious and extensive but the IRS has had less trouble with those that file with this version as opposed to the 1023-EZ. Form 1023 is 12 pages long and is typically longer depending on the organization type and the scheduling paperwork that may be required. The fee to file this form is $400 if a corporation plans to bring in less than $10,000 in gross revenue or an $850 fee if the amount of gross revenue is larger. The form can be accessed online through a PDF form. The paperwork may then be filled out digitally or printed and handwritten. Form 1023 calls for more detailed information. A higher explanation of facts surrounding the topics below are needed when filing for tax-exemption using Form 1023.