New Form 1023-EZ: Small Charities

In Accounting & Finances, Business, Taxes on July 27, 2014 by Sufen Wang

backlog-thumb-250x254-3799Easy, Breezy, Beautiful, New Form 1023-EZ: Small Charities Get a Streamlined 501(c)(3) Application
The saying “less is more” isn’t just true in terms of design. It also applies to the application small charities must fill out to receive tax-exempt status. In this case, less application pages to fill out = lessened IRS processing times = more small organizations approved more quickly = more resources available to process larger organizations’ applications. In other words, everybody wins.
lessismoreThe IRS released the new Form 1023-EZ on July 1 after taking into account critiques from the tax community and those working with charitable groups. Approximately 70% of all applicants qualify to take the easy road with this streamlined form, including most small organizations with gross receipts of $50,000 or less and assets of $250,000 or less. And the 1023-EZ really is A LOT shorter than the standard Form 1023 – 3 pages versus 26 pages.
IRS Commissioner John Koskinen explained that “this is a common-sense approach that will help reduce lengthy processing delays for small tax-exempt groups and ultimately larger organizations as well. The change cuts paperwork for these charitable groups and speeds application processing so they can focus on their important work.”
bookreaderBefore July 1, every charitable group had to wade through the same, dictionary-sized application, whether it was a “small soccer or gardening club or a major research organization.” Then all those groups had to stand around and tap their feet while they waited for the IRS itself to wade through the same dictionary-sized application and grant tax-exempt status. The result was not just tons of wasted time, but a backlog of 60,000 501(c)(3) applications, many of which have been pending for nine months. 
charity2The new three-page application should speed things up for the more petite charitable groups, making a dent in that backlog, and freeing up resources to review applications from the big organizations on the block (does the Tea Party ring a bell?). The only question is whether a significantly shorter 501(c)(3) application will result in compliance risks. After all, that’s the reason why that 26-page application was there in the first place. 
But Koskinen stated that “we believe that many small organizations will be able to complete this form without creating major compliance risks. Rather than using large amounts of IRS resources up front reviewing complex applications during a lengthy process, we believe the streamlined form will allow us to devote more compliance activity on the back end to ensure groups are actually doing the charitable work they apply to do.”
road_runnerThe whole point of the new EZ form is for it to be fast and easy. Accordingly, the Form 1023-EZ must be filed online using, and a $400 user fee is due at the time the form is submitted. The IRS recognizes more than a million 501(c)(3) organizations. Let’s hope this new form will lead to a million more charities being recognized – at a lot faster rate than before.
Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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