What Is the 1023 EZ Eligibility Worksheet?

Organizations seeking tax-exempt status under Internal Revenue Code (IRC) Section 501(c)(3) may use Form 1023-EZ, Streamlined Application for Recognition of Exemption. Before using this simplified form, an organization must complete the Form 1023-EZ Eligibility Worksheet, a required screening tool provided within the form’s instructions. The worksheet’s purpose is to help an organization determine if it meets the specific criteria for the shorter, online-only application. Successfully completing the worksheet confirms an organization’s qualification for the streamlined process, while failing to meet the criteria directs the applicant to the more comprehensive Form 1023.

Foundational Requirements Before Starting the Worksheet

Before an organization can properly address the questions on the eligibility worksheet, it must have certain foundational elements in place. The first is securing an Employer Identification Number (EIN), a unique nine-digit number assigned by the IRS. An EIN is a prerequisite for the application process.

The second requirement is the creation of a formal organizing document. Depending on the structure and state of formation, this could be articles of incorporation, a trust agreement, or articles of association. This document must contain specific language for 501(c)(3) status, and the worksheet will ask if it includes a clear statement of purpose limiting the organization’s activities to one or more exempt purposes. This organizing document must also contain a dissolution clause, which dictates that if the organization dissolves, its assets will be distributed for another exempt purpose or to a government entity for a public purpose.

The Eligibility Worksheet Questions Explained

The Form 1023-EZ Eligibility Worksheet contains a series of questions designed to filter out organizations that are too large, complex, or engaged in activities that require closer IRS scrutiny. Answering “yes” to any question on the worksheet means the organization is not eligible to use Form 1023-EZ and must instead file the long-form 1023. The questions assess different aspects of the organization.

Financial Thresholds

A primary focus of the worksheet is the organization’s financial scale, and the questions establish strict monetary limits. An organization is ineligible if it projects its annual gross receipts will exceed $50,000 in any of the next three years. Similarly, if its annual gross receipts have already exceeded $50,000 in any of the past three years, it cannot use the EZ form. Gross receipts are the total amounts the organization received from all sources during its accounting period, without subtracting costs. The worksheet also asks if the organization has total assets with a fair market value over $250,000.

Organizational Structure and History

The worksheet also examines the legal structure and background of the applicant. It asks about the entity type, confirming it is a corporation, an unincorporated association, or a trust. The questions verify that the organization was formed under the laws of the United States, any of its states or territories, or the District of Columbia. Further questions delve into the organization’s history, asking if the organization is a successor to a for-profit entity or if it has had its tax-exempt status previously revoked or denied.

Prohibited Activities and Classifications

A significant portion of the worksheet is dedicated to identifying organizations that are automatically disqualified due to their intended activities or classifications. These questions cover operations that the IRS has determined require the detailed disclosures of the standard Form 1023. For example, the following organizations are explicitly barred from using Form 1023-EZ:

• Churches
• Schools
• Colleges
• Universities
• Hospitals

The worksheet also screens out all private foundations and supporting organizations under Section 509. Other questions target specific activities, asking if the organization intends to offer credit counseling, maintain one or more donor-advised funds, or if more than an insubstantial part of its activities will be an unrelated trade or business. The worksheet also inquires about ownership structure, screening out entities that issue stock or are organized as limited liability companies (LLCs).

Completing and Submitting the Form 1023-EZ Application

Once an organization has worked through the eligibility worksheet and confirmed it can file Form 1023-EZ by answering “no” to all questions, it can prepare and submit the application. The worksheet itself is not submitted but should be retained for the organization’s records.

Information Needed for the Form

To complete the electronic Form 1023-EZ, several pieces of information are required. The organization’s EIN is needed, as is its legal name as it appears on the organizing document. The application requires the names, addresses, and titles of all officers, directors, and trustees. The filer must also provide a statement of activities by selecting the appropriate National Taxonomy of Exempt Entities (NTEE) code that best describes the organization’s mission. A key part of the application is the attestation section, where the filer must attest, under penalties of perjury, that the organization meets all eligibility requirements.

The Filing Process

Form 1023-EZ must be filed electronically through the Pay.gov website; the IRS does not accept paper copies. The user must search for “Form 1023-EZ” to locate the online application. Before submission, the applicant must pay a non-refundable user fee of $275, which must be paid electronically. After payment is processed and the form is complete, an authorized officer, director, or trustee must electronically sign the application. Upon successful submission, the system will generate a confirmation receipt, and the IRS typically issues a determination letter within a few months.

When You Are Ineligible for Form 1023-EZ

Answering “yes” to any question on the eligibility worksheet means an organization cannot use the streamlined application, requiring it to instead use the more detailed Form 1023. The full Form 1023 is a significantly more involved application. Unlike the attestation-based approach of the EZ form, it requires applicants to provide detailed narrative descriptions of activities and extensive financial data. Applicants must also attach their complete organizing document and bylaws. The filing fee for Form 1023 is higher at $600, and its review process is more rigorous and generally takes longer.