On July 1, 2014, the IRS began accepting applications for tax-exemption on its new Form 1023-EZ. This streamlined application form is a potential boon to small nonprofits who meet certain filing criteria, one of which is having gross annual receipts not exceeding $50,000.

Depending on your perspective, you may or may not be excited about the new EZ form. On the plus side, it is relatively brief (six pages as opposed to 26), and the user fee is modest ($400 as opposed to $850). Even better, the IRS promises an expedited review process for most applicants. The prospect of a speedy review is good news for all, considering that the IRS currently has a backlog of more than 60,000 applications. (It is sometimes taking two or three years to get an application processed.)

Some observers, however, are concerned that the new streamlined application form, coupled with only a cursory review by the IRS, will result in tax exemption being granted to organizations that don’t actually qualify for it. This, in turn, will create a ripple of bad effects for the IRS, state regulators, and donors.

It is true that the EZ application form and expedited review process do open the door to potential abuse and errors. On the other hand, they will enable many eligible nonprofits to maximize both cash flow and fundraising opportunities in their early years. In fact, our office is currently processing three EZ applications, and we expect to begin work on another two very shortly.

If you are interested in learning more, please give us a call!