Applying for Tax Exemption, the Form 1023, a high level overview.

After an organization has been created under state law, acquired an employer identification number and identified the appropriate federal tax classification, the organization is ready to prepare the Form 1023, Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code.

The purpose of the form is to apply for tax exemption under Section 501(c)(3) of the Internal Revenue Code. This application is due within 27 months from the end of the month in which the organization is formed. This form can be cumbersome as the IRS requires specific financial data, organizing documents, and narrative description and details of the organization. The estimated average times to complete the form, including recordkeeping, learning about the law and preparing the form, per the IRS, is over 150 hours. Therefore, I recommend having a tax professional with experience in this area assist in preparation of the form.

Certain organizations are considered tax exempt under Section 501(c)(3) without having to file the Form 1023. These organizations include:

• Churches 
•  Integrated auxiliaries of churches and conventions or associations of churches 
• Any organization that normally has less than $5,000 in gross receipts in each taxable year

The Form 1023 is a public document along with the Form 990 and 990-T. The organization should make this form available for public inspection and is required to provide, upon request, copies without charge.

If you need more information about the Form 1023 and the application process, please contact me.

11/14/08 Posted by Jamie Graham