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Non-profit organizations

IRS Scores a Win with Form 1023-EZ

IRS logoLast summer, the Internal Revenue Service rolled out a new form, called 1023-EZ. Form 1023-EZ is a simplified, electronic application for non-profit tax exemption from federal income tax. The form was designed to be used for smaller organizations.

The 1023-EZ is just 3 pages long and must be submitted electronically, reducing paperwork. Form 1023 (the traditional and older form) is 26 pages by comparison.

The IRS has released a one year review of the form, including how customers interacted with it, its general accuracy and the flow of the forms through the IRS pipeline. The review reveals that Form 1023-EZ had a very good year, especially after the form and processing were tweaked during the first six months.

Some key statistics from October 2014 to March 2015:

  • Customer satisfaction with the form rose to 77% during this period.
  • Customer dissatisfaction with the form decreased to 7% (from 29% the previous six months).
  • The average processing time for Form 1023-EZ is 13 days. This compares to 191 days for the traditional Form 1023.
  • 95% of all Form 1023-EZ’s that have been submitted have been approved.
  • So far in fiscal 2015, the IRS has received 43,157 1023-EZ forms.
  • About half of all new applications for tax exempt status utilize the Form 1023-EZ.

The IRS admits that there was a terrible backlog of pending approvals in the Tax Exempt/Government Entities Exempt Organization Division prior to the rollout of the new form. At the beginning of fiscal year 2014, there were 75,000 open applications and some of these had been pending approval or rejection for over a year.

One of the issues that tax attorneys and IRS personnel are carefully watching throughout this introductory year and beyond is compliance, especially because the 1023-EZ doesn’t require the kind of supporting documentation that the 1023 does.

Jeffrey Moss, a tax attorney with Dawda Mann adds, ”The Form 1023–EZ has worked very well for the clients and organizations that are able to file the short form. We have been able to obtain IRS approval in 2 weeks instead of waiting for months with the long form. This is one place where the IRS promise of efficiency has been fulfilled.”