You have decided to start a nonprofit, completed your needs assessment, and perhaps even created your mission or vision statement. So, what’s next? The 501(c)(3) application, and we are here to help!
We have read the IRS documents that are necessary when creating a nonprofit, and looked at comments from nonprofits just like yours to recommend the best practices when filling out a 501(c)(3) application.
This article will cover the three areas to help make your filing easy to manage:
Preparation
Documents to Include
Helpful Tips
Let’s jump in with right 501c3 help!
Preparation
As with anything, preparation is key to success (and maybe to saving a few headaches!). This preparation will save you in the long run when you start the process of registering your nonprofit. Let's start on the right foot, you're almost there.
There are a few things you will need to gather and have in place before you start the 501(c)(3) application process.
Legal Formation
The first step of preparing your 501(c)(3) application is to become a legally formed entity. To do this you will need to have your articles of incorporation approved by your state.
Once you have filled out your articles of incorporation worksheet and your articles of incorporation are approved with 501c3 help, you are officially established! Now you can move on to the next step.
Employer Identification Number (EIN)
Your EIN is required for the tax-exempt filing paperwork (Form 1023), so make sure you have it before you start this process. The IRS has detailed instructions here about how to file a SS-4 to obtain an EIN.
Documents to Include
We’ve got some good and bad news. The bad news is that a 501(c)(3) application is actually a file of documents. The good news is that you may only need one IRS form and supporting documents for a better 501c3 help!
Form 1023
Form 1023 will be the most time-consuming part of the application process. But don’t fret! We are here to give you the best practices and resources to help you get through it.
There are two types of form 1023 to choose from: the long form or the streamlined (1023 EZ) version.
Let us explain better the main differences between them:
Form 1023: This is going to be a great exercise for your Board. As your organization matures, you will need to be able to answer the questions on this form. The form is 40 pages in length and will cost your organization $600 to file. Thankfully the IRS has instructions you can use in conjunction with the document.
Form 1023-EZ: This form is much easier to file, and most nonprofits prefer to file this version. Why wouldn’t you? It saves time and money, both precious things to a new nonprofit. To qualify for this streamlined form your nonprofit needs to have less than $50,000 in annual gross receipts for the next three years, and your assets cannot exceed $250,000.
These sources say that filing a 1023-EZ is a bit like using a free online tax service. Sometimes you don’t understand everything, and you may answer incorrectly, be sure to research as much as possible before you submit an answer that you are unsure of!
Of course you can submit the form yourself, but we recommend getting some legal advice to ensure that it is filled out correctly.
Why? Because it can take on average 18 months to get approval. Furthermore, make sure you qualify to all requirements because you should anticipate some random audits. Getting legal help doesn’t always mean shelling out the big bucks; you should research legal aid offices and law school clinics in your area for a more budget-friendly option.
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