Lower Application Fee for Form 1023-EZ

The IRS released a Revenue Procedure today to change the application fee for Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. The application fee will be lowered from $400 to $275, effective July 1, 2016.

Organizations that are eligible to file Form 1023-EZ will be able to apply for 501(c)(3) status with the lower fee. The application fee for the longer Form 1023 will remain $400 or $850, depending on projected or actual revenue.

With a lower application fee, Form 1023-EZ may now be even more enticing to nonprofit founders. However, the 1023-EZ  is not without limitations and should be used with caution. We previously wrote about the Taxpayer Advocate Service study, which revealed that 37% of 1023-EZ applicants improperly received 501(c)(3) tax exemptions. It is critical that nonprofits meet the 501(c)(3) eligibility criteria and complete each required step to be established properly.

The IRS sends requests for additional information to a random group of 1023-EZ applicants. In addition, the IRS may audit 1023-EZ applicants more frequently down the line. As a service company specializing in establishing 501(c)(3) organizations, Harbor Compliance conducts a thorough 1023-EZ eligibility review for its clients and prepares each document to IRS standard. This includes not only 1023 and 1023-EZ forms, but also the articles of incorporation, bylaws, conflict of interest policies, and other required documents.

Learn more about our nonprofit formation services and how we can help you get your organization off the right start.