Alexander Accountants, CPAs
Preparing your experience
Alexander Accountants, CPAs
Preparing your experience
In order to apply for 501(c)(3) tax-exempt status, you file IRS Form 1023 — or sometimes Form 1023-EZ — so the IRS can officially recognize the nonprofit as exempt from federal income tax.
What this form is about
Who should leverage it
How to complete it
How it differs from Form 1023-EZ
Form 1023 is the IRS "Application for Recognition of Exemption Under Section 501(c)(3)," — the formal request for federal income tax exemption as a charity organization.
Once the IRS approves this 501(c)(3) application, in general, the organization can prevent federal income tax on mission-related income — and accept contributions that might be tax-deductible for donors.
Major advantages of a successful filing are presented as below:
Federal exemption on qualifying income
Ability for donors to claim charitable deductions — subject to their own tax rules
Access to grants and institutional funding
Stronger credibility — with the public and partners
As the form becomes part of the public record after approval, it also presents the snapshot of the distinct mission and activities as well as oversight.
The form can be filed in the case of running an organization — organized and operated exclusively for one or more 501(c)(3) purposes — like charitable, religious, educational and scientific or literary work.
We can list the groups that submit Form 1023 in general:
providing food and housing or counseling along with health programs
or scholarship funds and tutoring projects
as well as related faith-based entities
with a public benefit focus
As a general practice, new nonprofits looking for long-term sustainability and public support file some version of the 501(c)(3) application early in their life cycle — so they can establish a recognized tax-exempt foundation.
The preference between Form 1023 vs Form 1023-EZ is based mainly on the organization's projected size and structure as well as activities. The standard form is detailed — the EZ version is shorter and designed for simpler organizations as detailed in the table below:
| Question | Form 1023 (Standard) | Form 1023-EZ (Streamlined) |
|---|---|---|
| Who is it for? | Charities — especially those expecting to grow | Small nonprofits meeting strict eligibility rules |
| Revenue/asset thresholds | No specific upper limit | In general — under $50,000 in annual gross receipts — and under $250,000 in assets |
| Level of detail | Full narrative, budgets, governance and compensation detail | Short online attestations and fewer attachments |
| Filing method | Electronic filing via Pay.gov | Online filing via Pay.gov |
| Typical use | More complicated or larger organizations | Lean and local projects — with simple operations |
In order to recognize if you qualify for Form 1023-EZ — you must complete the IRS eligibility worksheet included with the IRS Form 1023-EZ instructions — if you do not satisfy every requirement, the long form should be used.
In this Form 1023 guide, we can break the application into sections — that assist the IRS in acknowledging who you are, what you do and how you are governed.
The core areas can be outlined as in the below list:
Legal name, Employer Identification Number (EIN) and contact information along with formation date
Whether you are a corporation or trust and association — and copies of the articles and bylaws
Specific language in the organizing documents about charitable purposes — and what happens to assets if the nonprofit closes
A narrative explaining the programs, who you serve and how your work advances exempt purposes
Information on officers, directors and key employees as well as any family or business ties among them
Historic figures — if you already operated — and projections for upcoming years
How you achieve the public support or other tests — so you are treated as a public charity rather than a private foundation
Form 1023 is completed by following a series of practical steps — that move from simple setup to final submission.
Applying for an Employer Identification Number is essential by using the IRS online EIN application or Form SS-4. Every application — even for a small nonprofit — needs this number.
Make sure the articles of incorporation or trust agreement include required charitable purpose — and dissolution language that satisfies 501(c)(3) standards.
Write a straightforward narrative explaining the current and planned programs — how often they occur and where they take place, and how they support the core mission.
Prepare actual figures if you have operations and reasonable projections (usually for several upcoming years) if you are new. These should align with your described activities.
Listing officers and directors and compensation paid as well as any family or business connections among insiders — so the IRS can recognize that decisions are not dominated by private interests.
Complete the electronic version on Pay.gov — upload any requested attachments and follow the IRS Form 1023 instructions on the screen.
Pay the necessary user fee through Pay.gov at the time of submission — the current published amounts are $600 for Form 1023 and $275 for Form 1023-EZ — though the IRS may update these from time to time.
Once confirmation is received from Pay.gov, the application goes into the IRS queue for review.
Close attention should be paid to IRS Form 1023 instructions — on organizing documents and activity descriptions along with public charity status and filing deadlines as well as user fees — because those areas generate follow-up questions in general.
The major items can be listed as below:
The IRS looks for exact phrases about charitable purposes and asset distribution — if they are missing, articles might need to be amended
Vague statements like "we will help the community" are simply not enough — explain programs in concrete terms
The instructions explain how different public support tests work — choose the one that actually fits the distinct funding model
Filing within 27 months of formation can enable recognition of exemption dating back to the start of the organization
When the IRS changes fees, it posts updates on its website — so it is wise to confirm the current amount before filing
Incomplete answers & weak descriptions or inconsistent numbers and missing attachments can naturally create issues. We can detail them as below:
Leaving sections blank when they apply to you can easily result in requests for additional information
Generic & short sentences, in general, trigger follow-up letters asking what the organization really does and who you actually serve
Budgets that do not fully align with the narrative create doubt about feasibility
Omitting policies — or not clearly explaining how insider transactions are handled can raise governance concerns
In the case where funding sources are not described — it becomes harder for the IRS to classify the organization as a public charity
Upon submitting the 501(c)(3) application, the IRS reviews the materials and decides whether to approve and then sends a written determination letter if everything checks out:
The application is logged in and assigned for review
An IRS specialist examines the form and attachments as well as supporting documents
The specialist either approves or asks for more information and proposes an adverse determination
If approved, you receive a determination letter confirming the exempt status and effective date
For straightforward filings, a decision in general might arrive within several months — yet more complicated structures or unusual activities can naturally take longer.
Once approved, filing annual Form 990-series returns is general practice in order to keep the status in good standing.
Alexander Accountants, CPA can guide nonprofits through every stage of Form 1023 — from early planning to final IRS response. Our support process is presented as below:
Reviewing your mission and programs along with legal structure to confirm that a 501(c)(3) model is appropriate
Checking articles of incorporation and bylaws as well as policies to make sure key clauses match IRS expectations
Aiding you describe programs and build numbers that reflect real-world plans
Completing Form 1023 or Form 1023-EZ on Pay.gov with the correct attachments and user fee
Assisting you in answering any IRS letters that ask for clarification or additional information
Applying is via filing Form 1023 or — if eligible — Form 1023-EZ through Pay.gov with the EIN, organizing documents and activity descriptions along with the basic financials.
Yes, Form 1023 and Form 1023-EZ are both submitted electronically through Pay.gov with the required user fee.
The IRS charges a user fee for Form 1023 — and a lower fee for Form 1023-EZ. These fees are paid at the time of online submission.
Nonprofits generally file soon after formation — and generally focus on submitting within the IRS's 27-month window — so they can seek retroactive recognition.
Form 1023-EZ is shorter and faster — but only available to smaller organizations that satisfies the distinct IRS eligibility rules.
It is possible to file on your own. However, nonprofits generally work with a CPA firm like Alexander Accountants, CPA in order to lower errors and speed up the process.