There are two options you can choose when filing for your exemption as a public charity: Form 1023-EZ or the full-length Form 1023.

The Form 1023-EZ is filed exclusively online, and it’s the quickest and easiest way to exemption as a 501(c)(3) public charity if you are eligible. This filing is an abbreviated and less expensive form to ask the IRS for your exemption, and it usually results in a decision within two months.

The full-length Form 1023, which can either be filed online or by mail, asks for substantially more information and comes with a heftier filing fee. Processing times are slower (usually) and the work required to fill it out is much greater.

So, you might be asking, why would anyone want to file the full Form 1023?  The answer is quite simply that sometimes you have to.

Filing the EZ (“Easy”) Way

Form 1023-EZ is about as easy as its name suggests, but whether you’re allowed to use it to file for your organization’s exemption depends on your answer to 30 “yes” or “no” questions.  Filers of the EZ must first review and answer the questions on the IRS’s Eligibility Worksheet to determine whether you trigger any of the scenarios that would preclude you from filing the EZ.  In other words, the Worksheet tells you if you must file the longer version of the Form 1023.

Common reasons that would prevent you from using the EZ form would be if you reasonably expect to earn more than $50,000 annually in your initial year or the next two years, if you plan to be a church, school, or hospital, or if you plan to maintain Donor Advised Funds. Most organizations applying for exemption under 501(c)(3) are applying because they plan to engage in a traditionally “charitable” endeavor, like helping the homeless, the poor, or the sick, taking care of stray animals, or some other activity that has traditionally been seen as exempt, so they don’t often get tripped up by anything other than the $50,000 annual income threshold. If you can answer “no” to all of the question on the Worksheet, then the EZ is probably for you.

The benefit of filing the EZ form is that it’s a shorter and easier form to fill out than the alternative, and on average it will get you a determination from the IRS quicker. While there is not set date, the EZ form can get your exemption usually within 2 months. It’s also less expensive to file with the IRS. The one drawback, objectively speaking, is that you’ll have to pick your own NTEE code; that’s the code that explains what your organization’s purpose is. 

And yes, the EZ filing is online, so no need to deal with paper!

Filing the Long (“Normal”) Way

The full Form 1023 seems like a daunting task, especially if you’ve printed out the form along with its instructions and intend to file it by mail. Luckily, like the EZ form, the full form can be filed online. And, as you might have guessed, you will have to answer more than just the 30 “yes” or “no” questions from the EZ form; you’ll have to answer those questions, plus a lot more, then explain your answers in some cases.

While it does seem like a lot of work, the person preparing the full form generally already has the information necessary to complete the form. It’s really just a matter of reading and taking the time to fill out the answers. 

For starters, you do have to explain in much greater detail the purpose of your organization and the details that make you eligible for exemption. While the EZ form limited your response to just about one sentence, the full form requires significantly more details, including where your funding comes from, how you carry out your activities, and who carries them out. The good news is that you should know that information already. Artfully presenting the information may take some work, but the IRS doesn’t expect that you have a PhD in creative writing.

Additionally, you must provide a reasonable estimate of your income and expenses. Depending on when exactly you formed your organization at the state level, you will have to enter up to 5 years’ worth of expected or actual income and expenses. This is far easier if you manage a new organization and are filing within the first few months of your formation date. If you have to return to your books from two or three years ago, it might not be as easy. Still, if you’re being asked to file for future years, the IRS is just asking for your reasonable estimates. Later, if your actual income and expenses are different than what you provided in your application, the IRS will not punish you for it.

You will also face a series of question on the full form that will likely not apply to you. For example, there are questions about pay for officers and directors, grants to non-exempt entities, grants to foreign entities, whether you’re a successor organization, and whether you intend to provide healthcare services or credit counselling services. While in most cases, the questions will be inapplicable, selecting “yes” to any one of them triggers additional questions and in some cases an additional form to fill out (known as a Schedule). For example, if you are applying as a church, you’ll be asked to fill out Schedule A; if you answered “yes” to being a school, you’ll have to fill out Schedule B; if you didn’t file within 27 months of forming your organization, Schedule E… so on and so forth.

There may be no benefit at all to filing the full form if the EZ form is available for you, but in some cases, you simply must file the full form. Processing times for the full form are usually much longer than for the EZ form, potentially taking several months before the IRS decides on your exemption. The price tag for the full form is also higher than for the EZ filing.

As should be clear by now, if you can file the EZ form, it’s to your benefit to do so.

When should you ask a lawyer for help?

While there are some tricks to the trade that attorneys may use to increase the likelihood of getting your exemption quicker, there isn’t a guarantee. No attorney can guarantee that using their services will get you a quicker response from the IRS. The IRS cares little about whether you’ve paid a lawyer. Even so, there are ways a lawyer can help you!

If you are unfamiliar with, don’t have time to understand, or are intimidated by the incorporation or IRS filing process, an attorney may save you time and worry. Additionally, if you are not the type to want to read the instructions for government forms, an attorney will be of great benefit.

If you’re proposed exempt activity doesn’t sound to you like it falls within what is traditionally thought of as “charitable,” an attorney can help you determine whether it is.  If it isn’t, the attorney can help you shape your purpose to fit within what the IRS will allow. 

Finally, if you’ve previously applied for exemption and have been rejected for one reason or another, an attorney can help you determine what changes should be made to your application and how best to respond to the IRS to increase your chances of success.