Form 1023 – Applying for Tax-Exempt Status as a 501(c)3
While we have spent the past week reviewing reporting forms for nonprofits, we are taking a step back to look at how to fill Form 1023, the first step in acquiring tax-exempt status.
What is Form 1023?
Form 1023 is an IRS tax form filed by nonprofit organizations to apply for exemption from federal income tax. The form serves as an application. Once the application is approved, the organization will receive a letter of approval from the IRS. The organization will then be classified as either a “public charity” or a “private foundation.”
Other organizations that can fill out Form 1023 include those that fall under section 501(e) and (f) (cooperative service organizations), section 501(k) (childcare organizations), and section 501(n) (charitable risk pools).
Who needs Form-1023?
Any organization that falls under 501(c)(3) guidelines needs to fill out 1023 Form in order to avoid paying taxes. While it’s not required by law, it really helps non-profit organizations to file this form.
What other forms accompany Form 1023?
The forms that accompany Form 1023 depend on the type of organization filing for tax exempt status.
Church – 1023 Schedule A
School, College, University – 1023 Schedule B
Hospital, Medical Research Organization – 1023 Schedule C
Section 509(a) Supporting Organization – 1023 Schedule D
Organizations that didn’t file within 27 months of formation. – 1023 Schedule E
Home for the Elderly, Handicapped and Low Income Housing – 1023 Schedule F
Successor to Other Organizations – 1023 Schedule G
Scholarships, Fellowships, Educational Loans, Educational Grants, Individuals/Private Foundations With Individual Grant Procedures – Form 1023 Schedule H
How do I fill out Form 1023?
When filing, the IRS recommends that you fill out and submit forms in this order:
1. User fee enclosed but not attached to the application form.
2. Form 1023 Checklist.
3. Form 2848, Power of Attorney and Declaration of Representative (if needed).
4. Form 8821, Tax Information Authorization (if needed).
5. Expedite request (if needed).
6. Application (Form 1023, Checklist, and Schedules A through H, as required.
7. Organizing document.
8. Amendments to organizing document in chronological order.
9. Bylaws or other rules of operation and amendments.
10. Documentation of nondiscriminatory policy for schools, as required by Schedule B.
11. Form 5768, Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation (if filing).
12. All other attachments, including explanations, financial data, and printed materials or publications.
When filling out these forms, you may need additional space that the form does not provide. You can use attachments that follow these guidelines for any additional space that you need:
1. Use 81/2 x 11 inch paper.
2. Provide your name and Employer Identification Number (EIN) at the top of each page.
3. Identify the Part and line number to which the attachment relates.
4. Attachments must be in English.
5. Generally, attachments in the form of tape, recordings or other electronic media are not acceptable unless accompanied by a transcript.
In addition to all of this, you should include any court decisions, rulings, opinions, or any other documents that will assist with processing.
When is Form 1023 due?
It is best to file the 1023 Form BEFORE the 27 months after the organization has started operation. If you file within 27 months after your organization was formed, the original legal date of formation will be the effective date of your tax exemption.
For example, let’s say that you started your nonprofit on January 1, 2016. A year later, you are ready to file your taxes. Because you have not been awarded exemption status, you owe the IRS $5,000. You pay the IRS $5,000. You file Form 1023 on January 1, 2017. You are awarded tax exempt status on January 1, 2018 (24 months after the nonprofit was formed).
Because you filed and were awarded exemption status within 27 months of formation, your tax exemption status goes into effect on the date of the original formation (January 1, 2016). You will receive a refund for the $5,000 in taxes that you paid as a result.
Where do I send the 1023 Form?
After completing Form 1023 and filling out all of the related documents, put them into a mailing envelope. Send them to…
Internal Revenue Service
P.O. Box 192
Covington, KY 41012-0192