IRS Releases Online, Electronically-Fileable Form 1023
On Friday, January 31, 2020, the IRS surprised most of the nonprofit community by announcing a new online version of Form 1023, the application required of nonprofits seeking recognition as a 501(c)(3) charitable organization. This e-fileable version was immediately live, and will become mandatory by April 30, 2020…no more paper and no more snail mail packages.
The 26-page paper version has remained largely unchanged for over 30 years, the only significant changes being a series of filing fee updates here and there. The new Form 1023 online version joins Form 1023-EZ, the streamlined application for micro-charities released in July 2014, on the Pay.gov platform.
Once the news hit, our Formation Team immediately began to put the new version through its paces, entering several clients’ data into it. The questions are largely the same as the paper version, but significantly rearranged. There are notable updates to several questions that finally bring the application into the 21st century with regard to web-based communication.
For example, a question on Schedule B (the questionnaire for private schools, colleges, and universities) formerly required a school to annually publish its non-discrimination policy in a local newspaper, even dictating the size of the font and column-inches of the ad. Now, an organization is allowed to permanently publish its policy on its website instead. Progress indeed!
Another significant element is that the multi-page application itself seems to be well thought-out with regard to field masking, cross-checked data, and conditional logic. You simply cannot enter junk answers and expect to progress to the next page. It won’t work. The application pretty much forces the user to know what they’re doing before it will accept answers.
This is in major contrast to the IRS’s first attempt at an electronic Form 1023 over a decade ago, a project titled Cyber Assistant. Foundation Group was chosen by the IRS back in 2008 to be the sole beta tester for Cyber Assistant. That program was not web-based, but rather software that had to be installed on a PC. It was not well-coded, and IRS pulled the plug before it ever went live. It has taken 12 more years to finally get an electronic version released that works as it should.
So far, we’re impressed. The biggest takeaway we noticed is that it will likely discourage do-it-yourself filers, and likewise, greatly reduce the amount of incomplete and garbage applications the IRS has to deal with. At first blush, it would seem that an online version would make DIY easier, but we disagree. Incomplete applications simply cannot be submitted.
One more thing: the filing fee remains $600, but now must be payed online via credit card. No more checks.
The new Form 1023 is live now. After April 30, you won’t be able to use anything else.
Comments (13)
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Hi Greg!
I just chanced upon this site trying to do some research and it’s really amazing. You guys know your stuff! Question please: I have an existing church without members (had planned on it but it never really came about…). Now we are establishing a k – 12 school (and have applicants!) as a separate 501c3 (to keep the hierarchy and areas of governance separate and also so the church can continue to do additional religious activities perhaps even soon expanding it’s programming beyond the school) under the churches ‘general supervision and control’. We will be holding services in conjunction with the school day for the children. I read (probably on your site) that churches need to maintain their membership. But, must we make all the children enroll in both the school and the church or is enrolling in the school enough since it’s under out general supervision and control and we will be overseeing the services?
Thanks!
Great question, and sorry it took me so long to answer. I agree that there are distinct advantages to operating the school as a separate entity. There should be no need, however, to require dual membership. There’s nothing stopping the school from having the church provide spiritual support for the kids and administrative control, without the families having to join the church.
This may be a situation where you want to retain our formation/501(c)(3) services for the school, if you haven’t already. There are some choices to make, such as whether or not to make the school a “functional auxiliary” of the church, or truly a separate entity. That alone carries a number of ramifications. Good luck with it!
We already have established LLC in Wyoming. All our business currently is in Georgia. We have a home building business and would like to begin to train and hire contractors and employees in need of a “second chance” (ie: criminal record)
1. Can we add a 501C3 under the LLC?
2. Can outside contractors and/or employees of the LLC and/or 501c3 be paid salaries from either business?
Sorry for the response delay, Joan.
1. No you cannot use an LLC. Corporations, unincorporated associations, or trusts only. I highly recommend the nonprofit corporate model.
2. Employees and contractors should be paid from the business that they are providing services for. If it’s both, then they should have 2 employers.
The questions you are asking are typical to ones we hear when there is a proposed nonprofit that will exist alongside an existing business. Be very careful here. It’s all potentially doable, but the devil is in the details. This is not a DIY project. Call us for help if you are seriously considering this. This could work very well, or be something you seriously regret.
Hi, my husband and I are starting a non profit organization. Currently working to obtain exempt status. Do you recommend filing with 1023EZ? Also I’m having trouble finding any revenue rulings to reference on our application.
That’s because the Form 1023-EZ doesn’t allow for adding supplemental information. If you have a program or purpose that you believe requires explanation to justify tax exemption, do not use the abbreviated process. Use the standard Form 1023, or better yet, get with us and let us help.
Can you file/designate our LLC (not for profit) as a 501(c) 3 charity? We are based in Florida. .
Most of the time, LLCs do not qualify to be 501c3. We can definitely help you setup a 501c3, but you may have to form a new corporation. We help with that, too. I recommend you reach out to our team for a conversation to see how we can assist. 888-361-9445
Being that board member’s addresses will be made public from the 1023 form, can you please expound on what address can be used for each member? (home, registered agency, work, mailing) Thanks you so much in advance for the information,
It is perfectly fine to use the organization’s address, whether street or PO Box, on Form 990.
That’s awesome. Regarding each board member for the form 1023EZ that you recently posted about filing electronically, is it alright to use other addresses besides a board members home address if they don’t want it to be public record?
Yes, you can use the nonprofit’s address for that, too.
Great! Thanks again.