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Did You Know? IRS Simplifies Process to Obtain Tax Exemption for Certain Types of Not-For-Profit Entities

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Recently, the Internal Revenue Service released Form 1023-EZ. Up until this point, every organization desiring to obtain tax-exempt status under Section 501(c) (3) of the Internal Revenue Code had to file a full Form 1023. The full Form 1023, including all instructions and schedules, is currently over thirty pages long! If you are only trying to form a simple non-profit to engage in charity, the full Form 1023 can seem insurmountable and cost prohibitive.

In light of this, the IRS created Form 1023-EZ which is only three pages long. The instructions for this form contain a detailed list of questions that determine whether or not your entity can complete the simplified form. One of the major determining factors is whether the entity will have greater than $50,000 in gross annual receipts or over $250,000 in assets. While a large, not-for-profit family foundation formed for estate planning purposes is not likely to fall below this threshold, many other entities will never meet this minimum.

Filing has also become simpler, since Form 1023-EZ is filed online rather than by mail. The filing fee for Form 1023-EZ is also only $400, whereas the full Form 1023 can cost up to $850. There is also an early indication that the IRS is processing the Form 1023-EZ in a matter of one or two months rather than, in some instances, greater than a year to process a full Form 1023. Thus, Form 1023-EZ can be of great benefit in helping you achieve your charitable goals much faster.

Please remember, every individual circumstance is different, so it is always prudent to consult with an attorney who specializes in this area when starting a non-profit. Please contact Kelly Slattery, Heidi Cisan, or Dan Cronin at our law firm if you are in need of legal advice.