Form 1023 Definition

Form 1023 is a tax form that non-profit organizations file to get exemption status. If the Internal Revenue Service (IRS) accepts the application, the organization is exempt from paying federal income tax. Below, we provide more details on the definition of Form 1023, discuss the benefits of getting tax-exempt status, and explain the requirements necessary to file the form.  

What is Form 1023?

The IRS’s Form 1023 is an application for recognition as a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code (IRC). Businesses that get this exempt status are often referred to as “non-profits” or “501(c)(3)s.” 

Form 1023 Benefits

Now that you know the Form 1023 definition, let’s look at the benefits of applying for 501(c)(3) status. Becoming a tax-exempt organization by filing Form 1023 has many advantages. First, the organization doesn’t have to pay federal income tax or federal unemployment tax. Your non-profit may also be exempt from state income, sales, and employment taxes. Second, contributions to the organization are tax-deductible. This incentivizes donors, which hopefully leads to more money for the organization’s efforts. Lastly, 501(c)(3)s also benefit from reduced postal rates. 

What are the Form 1023 requirements?

The IRS has many requirements for businesses using Form 1023 to apply for 501(c)(3) status. For example, the organization applying must:

• Be a corporation, limited liability company (LLC), unincorporated association, or a trust
• Operate exclusively for at least one exempt purpose
• Have an Employer Identification Number (EIN)

When completing Form 1023, you need to include financial data, organizing documents (e.g., Articles of Incorporation), and information about past and present business activity. For all of the details on Form 1023 requirements, read through the Instructions for Form 1023.

If you want your business to be tax-exempt from the day you start it, you must apply within 27 months of the end of the first month you created your organization. 

The IRS no longer accepts paper applications, so you need to file Form 1023 electronically. There’s a streamlined version of the application (Form 1023-EZ), but the organization must be eligible to file it.

Certain organizations aren’t required to file Form 1023 and are automatically considered tax-exempt. These include religious establishments (e.g., churches, synagogues, associations of churches, etc.) and any organization whose gross receipts during the year typically don’t exceed $5,000. 

Summary

Form 1023 is what you need to file with the IRS to become a 501(c)(3) tax-exempt organization. Once the IRS grants your organization tax-exempt status, it’s important to keep up with the mandatory annual filing requirements, which include Form 990 or Form 990-EZ. If you don’t, you may lose your exempt status. 

We Can Help

Before applying for 501(c)(3) tax-exempt status, you have to start a business. This includes forming an entity under state law, appointing a registered agent, and getting an EIN. We can help with all of those things and more! We offer LLC and corporation formation services. We can also request an EIN for your business and get a registered agent for you. Check out all of the products and services we offer, and let us know how we can help you run your dream business.