Form 1023 is the full application for 501(c)(3) recognition. It runs to roughly forty pages and is filed online through Pay.gov. The user fee is $600.
Unlike the streamlined Form 1023-EZ, this one requires copies of documents, financials, and additional information. It also takes longer for the IRS to review it.
A nonprofit can’t avoid it just because they want to. It’s the default application, and only certain nonprofits qualify for the Form 1023-EZ. If you don’t qualify, you’re going to need to file the longer Form 1023.
Who has to use it
You file the long form if you are not eligible for Form 1023-EZ. The IRS has a worksheet to help applicants determine whether they are eligible. However, churches, schools, hospitals, supporting organizations, organizations holding donor advised funds, and anyone whose projected gross receipts exceed $50,000 a year or whose assets exceed $250,000 in the first three years are not eligible.
Some nonprofits might even choose the Form 1023 even though they qualify for the Form 1023-EZ.
If you are still deciding, our walkthrough of how to file Form 1023-EZ covers the streamlined route and its eligibility worksheet.
When the long form is the cheaper choice
There is a category of organizations that qualify for the Form 1023-EZ but should still file the long form, even if this means more time and expense. This is because filing the short one costs them more in the end.
The clearest example is a private foundation that intends to award scholarships.
A private foundation that makes grants to individuals (scholarships, fellowships, internships, prizes, awards) has to obtain advance approval of its grant-making procedures from the IRS. Without that approval, grants to individuals are treated as taxable expenditures, which carry excise tax consequences for the foundation.
So the approval is not optional. The only question is when and how you get it.
If you request the advance approval with your 501(c)(3) exemption application there is no separate filing. However, you can only request this using the Form 1023, when completing Schedule H.
If you fail to request it when submitting the Form 1023’s Schedule H, you must later submit Form 8940, which carries its own user fee and its own wait. The Form 8940 fee is typically $3,500 — far more than the difference between the Form 1023-EZ and the Form 1023.
Before you start
In order to apply, you’ll need a few things before you ever even draft the application:
You must be legally formed. In most cases that means filing articles of incorporation with your state. Articles are the legal document that actually creates the entity.
Your organizing document must contain specific language. Most states have a fill-in-the-blank form that you can use to prepare your articles. However, these forms are the bare minimum required by the state. The IRS has its own rules, and failure to include their specific language can cause your application to be denied.
You need an EIN. Apply directly with the IRS. It is free, and it takes minutes online.
You will also need bylaws adopted and a conflict of interest policy in place. The application asks about both of these.
What you attach
At the end of the document, the application will ask you to attach supplemental documents. You will need to combine these documents into a single PDF. It should include:
- The official copy of your organizing documents. Most states will provide you with a copy of the file-stamped articles once they are approved. If they do not, you will need to request a copy from your state.
- Any amendments that you may have filed with the state. This can include name changes, purpose changes, and similar.
- Bylaws or other rules of operation, and their amendments. You will need to provide the official signed copy.
- If an attorney or CPA is representing you, you will need to include a signed Form 2848. This authorizes the IRS to speak with the representative on your behalf.
- Supplemental responses and anything else supporting your request. Sometimes there is not enough space in the fields. If that is the case, you can include the responses in the supplemental documents.
The narrative is the application
Part IV asks you to describe your past, present, and planned activities. This is one of the most important parts of the whole application. It is how you tell the IRS that you are worth receiving 501(c)(3) status.
Providing your nonprofit’s mission statement is not enough. Instead, you need to answer:
- What your nonprofit does
- How it does it
- Who it benefits
- How it is funded
- Where it happens
- What portion of your time and money are spent on your activities
The IRS is looking at one thing: does what you actually do fit inside an exempt purpose, and does it benefit a charitable class rather than particular individuals? Everything else in the form is supporting evidence for that question.
The financial data
Part VI of the application requires you to provide actual figures for years already completed and projections for the rest. How long you have been in existence determines how many years of data you need to provide.
For past years, you need to provide actual data. For current and future years, provide your best estimate.
Keep in mind, the IRS may ask for more information on this part of the application. It is important to provide all of the information.
The parts that get the most questions
After you submit your application, the IRS may request additional information. It is important to reply to this request within the allotted time. Failure to do so will lead to your application being rejected, which means you have to submit a new user fee and application, costing valuable time and money.
The areas that often get requests for more information include:
Compensation. The form asks who is paid, how much, and how the amount was set. Founder compensation with no independent approval process is one of the most reliable ways to draw follow-up questions.
Board independence. Related parties on the board are disclosed here. A board made up of the founder and two family members is not fatal, but it is noticed, and it will be weighed alongside everything else.
Insider transactions. Renting space from a director, buying services from a board member’s company, loans in either direction. These are not automatically disqualifying, but they must be disclosed and they need to look arm’s length.
Fundraising. How you will raise money, and from whom.
The schedules. Churches, schools, hospitals, low-income housing, scholarship programs, and successor organizations each have their own schedule with its own requirements. If a schedule applies to you, it is where most of the real scrutiny lands.
Filing and paying
Everything is submitted at Pay.gov. The $600 user fee is paid at the time of filing.
Then you wait, and possibly correspond
Long-form review takes months, and the timeline depends on the IRS queue and on whether your application raises questions.
If it does, you will get a letter from a reviewer asking for more information, usually with a short deadline. This is normal and not a rejection. It is also where a well-drafted original application pays for itself, because the questions are fewer and narrower.
The 27-month rule
Depending on when you file the Form 1023 or Form 1023-EZ, your nonprofit may be eligible for retroactive tax exemption. This means that donations received before the approval may be tax-exempt and tax-deductible.
Exemption is retroactive to your formation date.
The 27 months run from the end of the month in which you were legally formed. Gifts received in the gap are covered.
Exemption generally dates to when the application was submitted.
Everything before that sits outside your exemption — including donations your donors may have already claimed.
Given how long long-form review takes, calendar this early. The clock starts at formation.
You should not put this application off. It can impact the nonprofit and your donors.
How to make it go smoothly
Draft the narrative first, before opening the form. It is a writing task. Doing it inside a web form encourages short, unhelpful answers.
Make the documents agree. Articles, bylaws, narrative, and budget should describe one organization. Reviewers notice when the bylaws describe a membership structure the narrative never mentions.
Fix the organizing document before filing, not after. Amending articles mid-review is slow and awkward.
Answer what is asked. Extra material invites extra questions. Missing material guarantees them.
Do not hide the awkward facts. A disclosed insider transaction with a sensible explanation is a normal part of many applications. The same transaction discovered later is a much bigger problem.
Should you do this yourself?
You can. People do, and applications get approved.
The honest picture is that the long form is less about knowing the rules than about knowing how the answers read to someone who reviews these for a living — which activities need more detail, which disclosures need context, and which phrasing invites a follow-up letter that costs you three months.
If your organization is straightforward, well documented, and you write clearly, a self-filed application is realistic. If you have paid staff, a related-party board, foreign activity, a schedule that applies to you, or you simply cannot afford the delay of a back-and-forth, that is the point at which having it drafted for you is worth what it costs.
We handle the whole sequence, including incorporation, organizing documents drafted for IRS approval, EIN, the narrative, the financials, and any correspondence with the reviewer afterward. See our nonprofit formation packages for what that involves.
If you have already started and want a second opinion before you submit, let us know — that is a much shorter engagement, and a good use of an hour.
This article is general information, not legal advice, and reading it does not create an attorney-client relationship. Rules differ by state and change over time. Please speak with a licensed attorney about your own situation.