Form 1023-EZ is the streamlined application for 501(c)(3) status. It is three pages and filed entirely online. It is free to create an account with Pay.gov and the user fee is $275. It gets approved significantly quicker than the longer Form 1023.
It is the application people most often file when they should not have. Many people select it because all they see is the shortness of the form and the processing time.
However, not all nonprofits qualify. Selecting it when you shouldn’t have can cost more money, time and resources.
Before you even apply
You must do three things before even preparing the application. Doing these things wrong can cause the application to be denied.
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.
Step 1: Complete the Eligibility Worksheet
This is not optional and is not part of the application itself. Instead, it is a worksheet the IRS has provided to help people understand whether or not Form 1023-EZ is the correct application.
This worksheet can be found in the Form 1023-EZ instructions. Although it is not submitted to the IRS, you should complete it before ever even preparing the application, to make sure you qualify.
The threshold that trips most people up is whether your annual gross receipts are expected to exceed $50,000 in any of the first three years, and whether your total assets will exceed $250,000 in fair market value.
Outside of that, many organizations will not qualify — churches, schools, hospitals, and other entities the IRS wants to give extra scrutiny to.
The worksheet has about thirty questions, and if you answer “yes” to any of them you do not qualify for Form 1023-EZ.
Where people go wrong: skimming the worksheet.
Step 2: Register on Pay.gov and open the form
Form 1023-EZ is filed only on Pay.gov. After creating an account, you will search for “1023-EZ” and start the application.
Nothing you enter is saved indefinitely, so have your information assembled before you start.
Step 3: Fill in the form
The form itself is genuinely short and straightforward. It asks for identifying information, your NTEE code describing your activities, and then a series of questions.
Among those questions are confirmations that your organizing document contains the required IRS clauses, that you will not engage in prohibited activities, that you meet the public support requirements, and so on.
When preparing this application you will notice that you do not actually submit any of these documents with the application. That does not mean you won’t have to give them to the IRS at some point, though. Sometimes the IRS will request these documents when reviewing your application.
What is an NTEE code, and how do you pick one?
The application asks for an NTEE code, gives you no guidance on the screen, and moves on. Most people pick something that sounds close and never think about it again. It is worth two minutes of thought.
Three characters. One letter, two digits.
The letter — major group
One of twenty-six broad fields, A through Z. Arts and culture, education, environment, animals, health, human services, religion, and so on.
The digits — specific activity
Narrows the major group to the particular thing you do within that field.
What it is. NTEE stands for the National Taxonomy of Exempt Entities. It is a three-character code that summarizes what your organization does. The system was developed by the National Center for Charitable Statistics, and the IRS uses it to classify exempt organizations.
Where the list lives. In the appendix of the Form 1023-EZ instructions. That is the list the IRS expects you to choose from, so use it rather than a code you found elsewhere.
Why it actually matters. Your NTEE code becomes part of your public IRS record. It follows you into the databases that grantmakers and donors search, and some funders filter their giving by it. A code that does not match what you do can quietly keep you out of searches you should appear in.
How to pick one.
- Describe your primary activity in one plain sentence. Not your mission statement — the thing you actually spend most of your time and money doing.
- Find the major group letter that fits that activity.
- Read every code within that letter before choosing. The right one is often further down the list than the first plausible match.
- If two codes genuinely fit, choose the one that describes your largest program.
Where people go wrong.
Classifying by who you serve instead of what you do. An organization providing job training to veterans is doing employment work, not veterans’ services, if training is the actual activity. Read the code descriptions carefully — some are defined by activity and others by population.
Picking the first plausible match. The lists are long and the closest fit is frequently not the first one you see.
Defaulting to a general code. Most major groups have a broad catch-all. It is available, but a specific code describes you better to the people searching.
Choosing aspirationally. Code the organization you are, not the one you plan to become. If your programs change substantially later, the classification can be updated.
One caution worth knowing: the code list is used for purposes beyond 501(c)(3) organizations, so not every code on it describes a charitable purpose. Choose one that matches an activity you can actually carry out as a 501(c)(3).
Step 4: Pay and submit
The user fee is $275 and paid at the time of filing.
Step 5: Wait and check your mail constantly
Approvals for Form 1023-EZ are typically much faster than when using the long form. As noted above, sometimes the IRS will request additional information while reviewing your application. It is important that you are constantly checking your mail.
If you do not reply to one of these requests in time, the IRS will deny your application and you will have to start all over again. Sometimes the IRS is asking for copies of documents, additional information, or even making a determination that Form 1023-EZ was not the appropriate form for you.
How will I know that the IRS has approved our request?
Once (and if) the IRS approves your application, you will receive a determination letter in the mail. Not only will it state that your nonprofit is tax-exempt, it will also determine whether contributions to you are deductible under Section 170.
You will also want to look at the section in the upper right about whether you need to file a yearly Form 990.
The 27-month rule, which nobody mentions
Depending on when you file 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 runs only from the date you filed.
Everything before that sits outside your exemption — including donations your donors may have already claimed.
The clock starts at formation, not when you start thinking about the application.
You should not put this application off. It can impact the nonprofit and your donors.
What we see go wrong most often
- Articles missing the required purpose or dissolution language, because the state’s fill-in form did not include it
- Filing the EZ while ineligible, usually a worksheet disqualifier that was skimmed past
- Optimistic revenue projections that were really hopes
- NTEE code chosen at random
- Applying past 27 months without realizing exemption would not be retroactive
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.
What advance approval actually requires
The IRS is looking for three things in your procedures:
- Grants are awarded on an objective and nondiscriminatory basis
- The procedure is reasonably calculated to result in the grantee actually doing the thing the grant is meant to fund
- You plan to obtain reports confirming the grantee did it
That means having a written selection process, defined eligibility criteria, a selection committee that is not simply the founder, and a follow-up mechanism — before you file, not after.
Other organizations in the same position
The scholarship case is the sharpest, but it is not the only one. It is generally worth choosing the long form if you plan to make grants to individuals in any form, if you expect to seek a foundation classification ruling, or if your activities are unusual enough that you would rather explain them than attest to them.
The through-line is the same: the long form has room to ask for things and room to explain. The EZ has neither, and everything you could not say in it becomes a separate filing later.
If that is you, our walkthrough of how to file the long Form 1023 covers what that application involves.
Should you file it yourself?
Honestly: if you are a genuinely small organization with straightforward charitable activities, articles that already contain the right language, and no plans to scale quickly, you can. It is a short form and there is no shame in doing it yourself.
Where it is worth having someone look is anywhere your answers require judgment rather than data entry. Whether your articles say what they need to. Whether a worksheet question actually applies to you. Whether you picked the appropriate NTEE code. Whether the EZ is the right form at all.
If you would rather have it handled end to end, our nonprofit formation packages cover incorporation, the organizing documents, the EIN, and the exemption application together.
If you’ve already started part of the process, let us know and we can create a custom package just for you.
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.