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The Difference Between A 1023 and A 1023-EZ

Sep 22, 2017 10:00:00 AM / by Alexis Pastrana

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.

Past, present, and planned activities

Compensation of directors, officers, trustees, and certain highly paid employees and contractors (“Close Personnel”)

Compensation of Close Personnel from related organizations

Sales and/or contracts between the organization and any Close Personnel (including any organizations they have certain affiliations with)

Family and business relationships among directors, officers, and trustees

Goods, services, and/or funds (grants) provided to individuals or organizations

Fundraising programs

In addition to the above information already needed, Form 1023 also requires a business to supply, articles of incorporation, bylaws, conflict of interest policy or of how the organization manages conflicts of interest, and financials for 3 or 4 years.

Form 1023 must be complete and printed out before sending it in for review. A hardcopy must be mailed to the IRS for review and approval and can take up to 180 days/6 months to process.

Form 1023-EZ does not require nearly the amount of information as Form 1023 does and also costs much less. You can file for tax-exempt status at a much lower cost of $275 using Form 1023-EZ. The form is three pages long and online based. Form 1023-EZ requires minimal written information and mostly consists of check boxes. The form is then submitted online and generally takes 90 days/3 months to receive tax-exemption status.

An organization or business owner filing this form must be honest in all given information. Critics of Form 1023-EZ say that the lesser information needed may lead organizations into trouble if they are not completely compliant with the rules and regulations of being tax-exempt. A simple error, like checking the wrong box, can cause the process of Form 1023-EZ review to be inaccurate.

No matter which form is used, you want to make sure that all of the information is present, accurate, and clearly stated so that there are no mishaps during the filing process. Here at ExemptMeNow, we can help you file both forms in less time than it would take if you were doing it alone. Our automated online service makes filing simpler and faster while gathering all of your exemption status data in one central storehouse. That means maintaining your status over your nonprofit’s lifecycle will be simpler as well.

Sources:

https://www.irs.gov/charities-non-profits/charitable-organizations/wheres-my-application

http://www.nonprofitlawblog.com/starting-a-nonprofit-form-1023-or-form-1023-ez/

http://www.nonprofitaccountingbasics.org/filing-exemption/form-1023-ez-part-1-2-overview-controversy

http://www.nonprofitaccountingbasics.org/filing-exemption/form-1023-ez-part-2-2-who-should-should-not-file

Topics: Forms, tax exempt status