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Form 1023

- Updated August 14, 2023 - 2.00 PM - Admin, Tax990

Nonprofit organizations that are established and operated for exempt purposes can obtain tax-exempt status from the IRS, provided they meet necessary requirements. In order to do this, they must apply for exemption through an application form.

Form 1023 is an application form that certain nonprofits can use to apply for tax exemption. This article details the purpose, filing requirements, and certain other information regarding Form 1023.

1.

What is the Purpose of Form 1023?

2.

Who Can File Form 1023?

3.

When Should You File Form 1023?

4.

What Information is Required to File Form 1023?

5.

What are the Additional Requirements for Filing Form 1023?

6.

How Do You File Form 1023 Electronically?

7.

What Happens After Obtaining Tax Exemption with Form 1023?

8.

Tax990 simplifies 990 Filing for Nonprofits!

Form 1023–Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code–is used by nonprofits seeking tax-exempt status under Internal Revenue Code (IRC) section 501(c)(3).

Organizations eligible to file Form 1023 can also choose to file Form 1023-EZ instead, if they so choose (depending on their eligibility according to the eligibility worksheet).

Form 1023 is generally filed by nonprofits with religious, educational, charitable, literary, and other similar primary operational purposes described under section 501(c)(3) to apply for tax-exempt status.

Some of the most common organizations that file Form 1023 are:

Schools

Hospitals

Animal Rescues

Sports Clubs

Scientific Organizations

In order to be recognized as exempt from the organization’s formation, the nonprofit should file Form 1023 within 27 months from the end of the month when it was formed.

If filed after 27 months since formation, the organization will only be considered as tax-exempt from the filing date.

Form 1023 comprises 10 parts. Below, you’ll find a summary of what key information required in Form 1023:

Basic organization details (name, EIN, address, etc)

Officers, directors, and trustees basic details

Organizational structure (corporation, LLC, etc)

All required organizing documents (articles of incorporation, trust agreement, articles of association)

Description of the organization’s past, present, and future activities

Compensation details of the organization members and other financial data.

One of the major details to report in Form 1023 is how organizations are classified. Unless the filing organization specifies itself as a public charity, the IRS will classify it as a private foundation.

If the organization is requesting public charity status, it must provide the information required to indicate its public support status. Learn more about public charities

Organizations that file Form 1023 may also be required to include applicable Schedules; these are used to report certain additional information required by the IRS, depending on what you report.

There are 8 available schedules for Form 1023:

Schedule A - Churches

Schedule B - Schools, Colleges, and Universities

Schedule C - Hospitals and Medical Research Organizations

Schedule D - Supporting Organizations

Schedule E - Effective Date

Schedule F - Low-income Housing

Schedule G - Successors to Other Organizations

Schedule H - Organizations Providing Scholarships, Fellowships, Educational Loans, or Other Educational Grants to Individuals and Private Foundations Requesting Advance Approval of Individual Grant Procedures.

The IRS mandates the e-filing of Form 1023. Therefore, organizations must submit their 1023 application electronically.

The steps to file Form 1023 are as follows:

Register for an account on Pay.gov

Find and select Form 1023

Continue on to complete the form

Once the Form 1023 has been approved, the IRS will provide a determination letter recognizing the organization as tax-exempt.

While nonprofits recognized as tax-exempt are no longer required to pay federal income tax, they still must report their financial information, activities, and certain other details to the IRS annually through a Series 990 Form.

Based on the organization’s gross receipts & assets, they will file the applicable form:

Form 990-N : Filed by organizations with gross receipts of $50,000 or less.

Form 990-EZ : Filed by organizations with gross receipts less than $200,000 and assets less than $500,000.

Form 990 : Filed by organizations with gross receipts of $200,000 or more (or) assets of $500,000 or more.

Form 990-PF : Filed by Private Foundations, regardless of gross receipts/assets.

Along with the 1023 Form, the IRS has also mandated the e-filing of 990 forms–meaning it’s vital that nonprofits find a trusted e-filing service for their 990 returns!

Tax990, an IRS-authorized e-file provider, serves as the one-stop solution for nonprofits looking to meet their 990 filing requirements. Get started today!