Nonprofit Start-Ups: Form 1023 or 1023-EZ?

Starting a nonprofit organization involves countless decisions, and one of the most critical choices you’ll face is which form to use when applying for 501(c)(3) tax-exempt status with the IRS. Filing for recognition as a tax-exempt organization ensures your nonprofit can provide tax-deductible receipts to donors and avoid paying federal income tax—a critical step for your growth. However, choosing the right application form—Form 1023 or Form 1023-EZ—can feel daunting.

Each form has unique requirements suited to specific types of organizations. We’ll break down the differences, benefits, and eligibility criteria to help you decide which form is the best fit for your nonprofit startup.

H2 Traditional Form vs. Streamlined Option

When applying for 501(c)(3) status, nonprofits have two main options:

1. Form 1023 (the traditional, long-form): Suitable for any nonprofit with no restrictions, but detailed and time-intensive.
2. Form 1023-EZ (a simpler, shorter form): Designed for smaller organizations but only available to nonprofits that meet strict eligibility requirements.

Here’s how they compare:

Form 1023 – The Traditional Route

Form 1023 is the standard, comprehensive application used by many nonprofits, especially those seeking complex or high-value operations. This form includes detailed questions about your organization’s mission, finances, and structure. While it provides a thorough overview to the IRS, it requires significant time and resources to complete.

• Length and Complexity: Form 1023 spans dozens of pages, accompanied by lengthy instructions.
• Cost to File: There’s a $600 filing fee, which must be paid via the secure online platform Pay.gov.
• Documentation Required: You’ll need detailed financial records, copies of organizing documents (like articles of incorporation), and information about your governance structure.
• Time Investment: Completing Form 1023 can feel overwhelming for founders due to its level of detail. However, the form is open to all organizations, regardless of their size or revenue.

Form 1023-EZ – The Cheaper, Simpler Option

Form 1023-EZ was introduced to make the application process easier for smaller nonprofits. It’s only three pages long and takes significantly less time to complete than the traditional form.

• Convenience: Designed for ease of use, this form can be completed in a fraction of the time it takes to complete Form 1023.
• Cost to File: At $275, the filing fee for Form 1023-EZ is less than half that of the traditional form, and it’s also submitted via Pay.gov.
• Eligibility Restrictions: Not every nonprofit qualifies to use this streamlined form. An IRS worksheet determines if your organization meets the criteria (more on that below).

However, keep in mind that Form 1023-EZ provides less detail to the IRS, which could lead to questions down the track if your organization lacks clarity in its operations.

H2 Use the Worksheet to Determine 1023-EZ Eligibility

Your ability to choose Form 1023-EZ depends on meeting specific criteria set by the IRS. Before you begin, complete the required IRS 1023-EZ eligibility worksheet.

Key Requirements

• Revenue Limit: Your organization must not expect gross annual receipts exceeding $50,000 over the next three years.
• Asset Cap: Your total assets (e.g., cash, property, and investments) must not exceed $250,000 in value.
• Organizational Structure:
• Only nonprofits formed in the United States, its territories, federally recognized Indian tribal governments, or the District of Columbia are eligible.
• The organization must be structured as a corporation, unincorporated association, or trust.

If you answer “yes” to any disqualifying questions on the worksheet, you must file the traditional Form 1023 instead.

For example:

• Are your expected gross receipts over $50,000 annually? Disqualified
• Do your assets exceed $250,000? Disqualified
• Are you organized outside the U.S. or D.C.? Disqualified

Take your time to carefully complete every question on the worksheet. Missing a small detail could lead to delays—or worse, an ineligible filing.

H2 Advantages of Filing the Correct Form

Selecting the appropriate form for your organization is critical to ensuring smooth IRS approval and starting your nonprofit with confidence.

Choosing Form 1023

• Best for: Nonprofits aiming for significant growth or managing complex financial operations.
• Reasons to opt for Form 1023:
• Comprehensive submissions reduce the chance of triggering questions or audits later.
• The level of detail provides the IRS with a clearer picture of your organization’s compliance with rules governing 501(c)(3) entities.
• Larger nonprofits don’t need to worry about the eligibility caps required for the EZ form.

Choosing Form 1023-EZ

• Best for: Startups or small nonprofits with minimal revenue and assets.
• Advantages:
• Saves time and money during the application process.
• Ideal for getting new nonprofits up and running quickly.
• Simplifies compliance for organizations with limited operations.

Be transparent and ensure you meet all eligibility requirements when submitting Form 1023-EZ. Filing the form without qualifying could place your tax-exempt status under scrutiny.

H2 Start Strong With the Right Form

Launching a nonprofit is a noble and impactful goal, but starting on the wrong foot with the IRS can create unnecessary challenges. Choosing between Form 1023 and Form 1023-EZ ultimately depends on your organization’s size, goals, and long-term plans.

• If you pass the 1023-EZ eligibility worksheet, the simpler form may save you time and resources as a startup.
• For organizations with larger ambitions or assets, the comprehensive Form 1023 is likely the best choice.

Still unsure about which form to file or need assistance with the process? At SD Mayer & Associates, our experts specialize in nonprofit compliance and strategy. We’re here to help you confidently select and file the right form, so you can focus on your mission.

Get started today with a consultation to set your nonprofit on the path to success!