How Can Form 1023 Help You Pay Less Tax?

This post was updated in April 2018

Form 1023: Application for Recognition of Exemption

Youve been working hard all year. Now you are planning your budget and don't want want to lose a single dollar. Therefore when tax season comes, you try to make the most money back on your income tax. How is that possible? Well, one of the best ways to pay the least amount of income tax is to file for tax exemption. In 2018, the IRS hasn't changed the rules of the tax exemption procedure. In the same way as before, you have to complete form 1023 to get tax-exempt status. But before you rush to the IRS to get the form, learn what it is all about and how to complete it. We’ll guide you through its key points.

Who needs an IRS Form 1023?

An IRS 1023 Form, which is the more common name for the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, is used by charity organizations qualified as corporations, unincorporated associations or trusts. These organization may fall into such categories: religious, educational, charitable, scientific, literary, those aimed to test public safety, or to foster national or international amateur sports competition, or prevent cruelty to children or animals.

All of the above-mentioned organizations should comply with their status, which means they are prohibited to take part in political campaigns, pay unjustified money to their employees and board members, and of course, be involved in the activities contrary to public policy and the U.S. law.

What is the purpose of filing the IRS Form 1023?

The primary goal of the 1023 form is to earn tax-exempt status for you. But you can't claim tax exemptions if your organization has no legal ground for it. If you match the parameters described earlier then you have a chance to pay less tax on your income. Officially speaking, in the case of the IRS’s favorable decision, the organization will be exempted from the federal income tax and will be referred to as a non-profit association.

Is Form 1023  accompanied by other forms?

As you might have guessed, claiming for tax exemption isn't a piece of cake. Besides the 1023 form you need to provide some other documents to support your eligibility for tax exemptions. Traditionally, the 1023 form is accompanied by organizational documents, like articles of incorporation, bylaws, description of the organization’s activities, financial information, and a user fee.

When is the IRS Form 1023 due?

Although you are generally given quite a long period to get tax-exempt status, you still shouldn't put off the whole filing procedure. In fact, you should do it within 27 months from the moment your organization was started so that its exemption may be dated back to that month. If this requirement is not met, the exemption will come into force from the filing date.

How do I fill out the IRS Form 1023?

This is probably the hardest thing about the whole 1023 form filing process. Form 1023 is 29 pages long. Obviously, you don't have to complete every page but even so the amount of work to be done is significant.

In the form itself you must provide very in-depth information concerning the organizations activities and its mechanisms of functioning. Therefore, some of the necessary fields to be completed concern the applicant’s identification, organizational structure, a description of the organization’s activity, information on the employee relationships and financial arrangements with them, etc.

Where do I send the IRS Form 1023?

The completed 1023 along with supporting documents should be mailed to the IRS to the address provided in the Instruction section.

If you wonder where you can get the latest version of the form, turn to PDFfilller. Here you can find updated information about all IRS forms.



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