Nonprofit Accounting
Nonprofit Management
Form 1023-EZ: Eligibility Worksheet, Fees and What Small Nonprofits Must Set Up After Approval
Last updated: October 17, 2026 · Independent guide · We do not sell rankings or coverage.
Form 1023-EZ is the IRS’s short online application for 501(c)(3) status, open only to organizations that project annual gross receipts of $50,000 or less for this year and the next two, had no year above $50,000 in the past three, and hold assets worth $250,000 or less. The user fee is $275, compared with $600 for the full Form 1023, and the IRS currently decides 80% of Form 1023-EZ applications within 22 days. Approval is the start of your compliance work: you then owe an annual return, donor acknowledgments, state filings and books that can prove your public support.
The rule in brief
- Who can use it: new or small corporations, unincorporated associations and trusts that answer “No” to all 34 questions on the Form 1023-EZ Eligibility Worksheet.
- Size limits: gross receipts of $50,000 or less in each of the past 3 years and projected for the current and next 2 years; total assets at fair market value of $250,000 or less.
- Fee and filing: $275, paid through Pay.gov; the form is filed electronically only. The full Form 1023 costs $600.
- Key date: file within 27 months after the end of the month you were legally formed and exemption reaches back to your formation date.
- Official source: IRS, Instructions for Form 1023-EZ (Rev. January 2025). We checked the rules on October 17, 2026.
What the rule requires: the eligibility worksheet
Before you open the form on Pay.gov, you must complete the Eligibility Worksheet at the end of the IRS instructions. The instructions say: “If you answer ‘Yes’ to any of the worksheet questions, you are not eligible to apply for exemption under section 501(c)(3) using Form 1023-EZ. You must apply on Form 1023.” You do not submit the worksheet, but the IRS tells you to keep it with your records.
The first three questions are the financial limits. Question 1 asks whether you project annual gross receipts above $50,000 “in any of the next 3 years,” counting this year and the next two. Question 2 asks whether receipts exceeded $50,000 in any of the past 3 years. Question 3 asks whether your total assets have a fair market value above $250,000. Gross receipts are everything received “without subtracting any costs or expenses,” so event ticket sales count in full, not net of the venue cost.
The other 31 questions screen out entity types and activities that need a closer look. We grouped them below from the January 2025 worksheet.
| Worksheet questions | A “Yes” means you file Form 1023 if you are |
|---|---|
| 1 to 3 | Over $50,000 in past or projected gross receipts, or over $250,000 in assets |
| 4 to 11 | Formed abroad or using a foreign mailing address; a successor to or controlled by an organization suspended under section 501(p); an LLC or other entity that is not a corporation, association or trust; formed as or succeeding a for-profit; previously revoked (other than automatic revocation) or exempt under another 501(a) section |
| 12 to 19 | A church, school, hospital or medical research organization, agricultural research organization, cooperative hospital or educational service organization, charitable risk pool, or a 509(a)(3) supporting organization |
| 20 to 27 | Doing credit counseling; investing 5% or more of assets in non-publicly traded securities; in loss-sharing partnerships with non-charities; selling carbon credits; an HMO or ACO; maintaining donor advised funds; testing for public safety |
| 28 to 34 | Seeking private operating foundation status or certain reinstatements; previously denied exemption or found ineligible for Form 1023-EZ; involved with federally prohibited controlled substances; exchanging, creating or distributing digital assets |
The form itself also requires attestations about your organizing document. You confirm that your articles limit your purposes to 501(c)(3) purposes, do not authorize you to carry on non-exempt activities beyond an insubstantial part, and dedicate your assets to exempt purposes on dissolution. The instructions give sample purpose and dissolution clauses. You also need an EIN before you can submit, and you describe your mission in no more than 250 characters.
Fees: Form 1023-EZ compared with the full Form 1023
The IRS states: “The user fee for Form 1023 is $600” and “The user fee for Form 1023-EZ is $275” (IRS, user fee page, last reviewed October 9, 2026).
| Item | Form 1023-EZ | Form 1023 |
|---|---|---|
| IRS user fee | $275 | $600 |
| Financial data | Yes/No answers on receipts and assets | Actual or projected revenue and expenses for 3 to 5 years, plus a balance sheet |
| 80% of determinations issued within | 22 days (120 days if further review is needed) | 191 days |
| Effective date beyond 27 months | Not available | Can be requested |
The financial data row comes from the IRS page on Form 1023 required financial information (last reviewed September 11, 2026). The fee gap is $325, so the fee alone should rarely decide which form you use.
Common reasons to file the full Form 1023 even when you qualify
Passing the worksheet makes you eligible, but you can still choose the full application.
- Growth just past the limit. If a planned grant or event could push receipts above $50,000 in any of the next two years, you cannot honestly answer “No” to question 1.
- An earlier effective date. Filing within 27 months makes exemption retroactive to formation. If you have existed longer and need an earlier date, the instructions say you must file Form 1023.
- A reviewed file. Form 1023-EZ relies on your attestations, and the IRS does not see your articles. The Taxpayer Advocate Service reported that, in its reviews of articles of incorporation in 20 states, the IRS “erroneously approved Form 1023-EZ applications between 26 and 42 percent of the time” (National Taxpayer Advocate blog, last updated February 6, 2023). An approval that rests on a defective organizing document can be revoked later.
- Activities the IRS wants to see. Payments to individuals, compensation of directors and dealings with insiders are all asked about on Form 1023-EZ. If your answers are “Yes,” a full narrative lets you explain the controls you use.
Who is exempt or excluded
Churches cannot use Form 1023-EZ, and the instructions note that churches may be treated as exempt without applying at all. Sole proprietorships, partnerships and loosely affiliated groups of individuals cannot use it either, along with the types in the worksheet table above.
The short form also limits your foundation classification. A 1023-EZ filer can be a 509(a)(1) public charity supported by gifts and grants, a 509(a)(2) public charity supported by gifts and program revenue, a 509(a)(1) organization supporting a government-run college, or a private foundation other than a private operating foundation. The instructions say that if you do not meet one of the public charity tests, you are a private foundation. Run the support calculation in the instructions before you check a box.
Timeline, deadlines and penalties
A realistic order of steps for a new charity is: incorporate under state law, adopt bylaws, obtain an EIN, complete the worksheet, file Form 1023-EZ on Pay.gov, and wait for the determination letter. The IRS “Where’s my application” page reports that “We issue 80% of Form 1023-EZ application determinations within 22 days” for applications submitted on or before February 24, 2026, and 80% within 120 days for applications that need further review (IRS, last reviewed June 28, 2026). The IRS also selects “a statistically valid random sample of applications for pre-determination reviews,” which can bring requests for documents.
Your approval may appear in Tax Exempt Organization Search (TEOS) before the letter arrives. If you do not file within 27 months of the end of your formation month, exemption starts on the date you submit, so the determination does not cover the period before you filed.
The annual return clock runs whether or not you have been approved. The instructions say an organization required to file a Form 990-series return or Form 990-N “must do so even if its application for recognition of exemption has not been filed or has been filed but not yet approved.” The most serious penalty is loss of status: “Failure to file a required return or notice for 3 consecutive years will result in auto-revocation of your tax-exempt status.”
Records you must keep
Keep a permanent file with the signed articles and their state filing certificate, the bylaws, board minutes adopting them, the EIN notice, your completed eligibility worksheet, a printed copy of the Form 1023-EZ as submitted, the Pay.gov receipt and the determination letter. The instructions recommend that you preview and print the application before you submit it.
Once you are approved, both you and the IRS must make the application and related documents available for public inspection. The Form 990-EZ instructions say to keep records supporting income and deductions for “a minimum of 3 years from the date the return is due or filed, whichever is later.” Keep governing documents and the determination letter permanently.
What to set up in your systems after approval
Staying exempt depends on routines you build in the first months after the determination letter arrives.
| Area | What to set up | Why |
|---|---|---|
| Annual filing | Calendar reminder for the 15th day of the 5th month after year end | Form 990-N, 990-EZ or 990 is due every year; 3 missed years means automatic revocation |
| Bookkeeping | Separate bank account; nonprofit chart of accounts; donor restriction tracking | Supports the annual return, the gross receipts test and the public support test |
| Donor records | Gift log by donor and date; acknowledgment template | Written acknowledgments for gifts of $250 or more; disclosures for quid pro quo gifts over $75 |
| Governance | Conflict of interest policy, document retention policy, minutes | Shows decisions are made for public, not private, benefit |
| State | State income tax exemption; charitable solicitation registration where required | Federal exemption does not cover state law |
Annual filings
An organization other than a private foundation whose gross receipts are normally $50,000 or less, which fits most new 1023-EZ filers, can submit the Form 990-N e-Postcard. It asks for eight items, including your EIN, tax year, principal officer and a confirmation that receipts are $50,000 or less, and it is due by the 15th day of the 5th month after your year ends (IRS, last reviewed October 9, 2026). If you grow, you move to Form 990-EZ and then Form 990. Our guide to Form 990-EZ thresholds and the ledger data each part needs explains when that switch happens.
Bookkeeping from day one
Open a bank account in the organization’s name and run every receipt and payment through it. Set up accounts that separate contributions, grants, program fees and event revenue, and track gifts with donor restrictions separately from unrestricted gifts. The 1023-EZ instructions measure public support over your first 5 years using the types, sources and amounts of revenue, so your ledger needs to show who gave what from the start. Our nonprofit chart of accounts template gives a structure mapped to Form 990 lines that also works for a small organization.
Donor acknowledgments
The IRS states that “a donor can deduct a charitable contribution of $250 or more only if the donor has a written acknowledgment,” and that “a charitable organization must provide a written disclosure statement to any donor of a quid pro quo contribution over $75” (IRS, substantiation and disclosure requirements, last reviewed October 1, 2026). Your template should state the amount and whether you gave goods or services in return. A simple donor database makes this repeatable; see our review of donor database options for small nonprofits.
Policies
Form 1023-EZ asks whether you pay officers and directors and whether you give funds to individuals. A written conflict of interest policy, signed annual disclosures and board minutes that record how pay and grants are approved give you evidence for those answers. Our conflict of interest policy template is based on the IRS sample.
State registrations
The instructions are direct: “Tax exemption under section 501(c)(3) is a matter of federal law. After receiving federal tax exemption, you may also be required to register with one or more states to solicit contributions or to obtain exemption from state taxes.” They point to the National Association of State Charity Officials at nasconet.org for state links. In California, for example, a 501(c)(3) organization submits Form FTB 3500A with a copy of its federal determination letter, and state exemption starts on the federal effective date (California FTB, 2025 Instructions for Form FTB 3500A, no date shown).
How we researched this
We read the full Instructions for Form 1023-EZ (Rev. January 2025), including all 34 worksheet questions, and the IRS pages on user fees, processing times, Form 1023 financial data, Form 990-N and donor substantiation, on October 17, 2026. We also reviewed the pages ranking for “Form 1023-EZ”: the IRS instructions, Harbor Compliance (which sells formation and registration services), the Aplos glossary entry (Aplos sells nonprofit accounting software) and the National Taxpayer Advocate blog. None of the commercial pages listed the full worksheet or covered the bookkeeping, donor and state setup that follows approval.
Related guides
- Form 990 Preparation Software: From Ledger to E-File
- Gift Acceptance Policy: Template and Non-Cash Gift Rules
Frequently asked questions
How much does Form 1023-EZ cost?
The IRS user fee is $275, paid on Pay.gov when you submit. The full Form 1023 costs $600. Any preparer or attorney fees are separate and are not set by the IRS.
How long does Form 1023-EZ approval take?
The IRS reports that it issues 80% of Form 1023-EZ determinations within 22 days, based on applications submitted on or before February 24, 2026. Applications picked for further review take longer, with 80% decided within 120 days.
Can we use Form 1023-EZ if we expect a $60,000 grant next year?
No. Worksheet question 1 asks whether gross receipts will exceed $50,000 in any of the current or next 2 years. A grant of that size makes the answer “Yes,” so you must file Form 1023.
Do we have to file anything with the IRS after we are approved?
Yes. Most new small charities file the Form 990-N e-Postcard each year by the 15th day of the 5th month after year end. Missing a required return or notice for 3 consecutive years automatically revokes your exemption.
Are donations made before approval tax deductible?
If you file within 27 months after the end of the month you were formed and you are approved, exemption is effective from your formation date, so gifts made in that period are covered. If you file later, exemption starts on your submission date.
Sources
- IRS, Instructions for Form 1023-EZ (Rev. January 2025). irs.gov
- IRS, Form 1023 and 1023-EZ: Amount of user fee, page last reviewed October 9, 2026. irs.gov
- IRS, Where’s my application for tax-exempt status?, page last reviewed June 28, 2026. irs.gov
- IRS, Form 1023: Required financial information, page last reviewed September 11, 2026. irs.gov
- IRS, Annual electronic filing requirement for small exempt organizations, Form 990-N (e-Postcard), page last reviewed October 9, 2026. irs.gov
- IRS, Charitable organizations: Substantiation and disclosure requirements, page last reviewed October 1, 2026. irs.gov
- National Taxpayer Advocate, A problem of the IRS’s own making: automatic revocations of 1023-EZ exempt organizations, last updated February 6, 2023. taxpayeradvocate.irs.gov
- IRS, Instructions for Form 990-EZ (2025). irs.gov
- California Franchise Tax Board, 2025 Instructions for Form FTB 3500A, no date shown. ftb.ca.gov
Sherman Hsieh
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