How to File IRS Form 1023 for Tax-Exempt Status

Filing IRS Form 1023 (or 1023-EZ) is the step that makes your nonprofit tax-exempt under section 501(c)(3) of the Internal Revenue Code. This is the most significant milestone in starting a nonprofit — and the one that trips up the most founders.

This guide walks you through choosing the right form, preparing every section, writing a compelling narrative, projecting your finances, and avoiding the mistakes that delay or derail applications.

Prerequisites: What You Need Before Filing

Before you can file Form 1023 or 1023-EZ, you must have:

Prerequisite	Status	Guide
Incorporated as a nonprofit in your state	Required	Articles of Incorporation
EIN (Employer Identification Number)	Required	How to Get an EIN
Articles of incorporation with IRS-required language	Required	Articles Guide
Bylaws with conflict of interest policy	Required	Bylaws Template
Board of directors in place	Required	Board Requirements
Mission statement	Required	Mission Statement Guide

If you're missing any of these, complete them first. The IRS will reject incomplete applications and your filing fee is non-refundable.

Which Form Should You File?

Criteria	Form 1023-EZ	Form 1023 (Full)
Projected gross receipts	Under $50,000/year for each of the next 3 years	$50,000+/year
Total assets	Under $250,000	$250,000+
Filing fee	$275 (non-refundable)	$600 (non-refundable)
Format	Online only via Pay.gov	Online via Pay.gov
Length	~3 pages of questions	26+ pages with attachments
Narrative required	Brief description only	Detailed Part IV narrative
Financial projections	Not required	3 years required
Approval time	2-4 weeks	3-6 months
Approval rate	~95%+	~85-90% on first submission

Use the IRS eligibility worksheet to confirm you qualify for Form 1023-EZ. If you qualify, there is no advantage to filing the full Form 1023 — it's more expensive, takes longer, and requires significantly more work.

Who Cannot Use Form 1023-EZ

Even if your receipts are under $50,000, you must use the full Form 1023 if your organization:

• Is a church, school, hospital, or medical research organization
• Is a supporting organization under Section 509(a)(3)
• Plans to operate in foreign countries
• Has had its tax-exempt status revoked
• Is a successor to a for-profit entity
• Has been in existence for more than 3 years

Filing Form 1023-EZ: Step by Step

Step 1: Complete the Eligibility Worksheet

Download and complete the Form 1023-EZ eligibility worksheet (it's not filed, just for your records). If you answer "Yes" to any disqualifying question, you must use the full Form 1023.

Step 2: Gather Your Information

You'll need:

• EIN
• Date and state of incorporation
• Mailing address
• Contact person name and phone number
• Brief description of your activities (2-3 sentences)
• NTEE code (the IRS classification for your type of organization)

Step 3: File at Pay.gov

1. Go to Pay.gov
2. Search for "Form 1023-EZ"
3. Complete the online form (takes 30-60 minutes)
4. Pay the $275 fee by credit card or bank transfer
5. Submit and save your confirmation number

Step 4: Wait for Your Determination Letter

Most Form 1023-EZ applications are approved within 2-4 weeks. You'll receive a determination letter by mail confirming your 501(c)(3) status. Keep this letter forever.

Filing the Full Form 1023: Part-by-Part Guide

If you need to file the full Form 1023, here's what each section requires:

Part I — Identification of Applicant

Basic information: name, EIN, address, contact person, date of incorporation, state, fiscal year.

Tip: Your name must exactly match your articles of incorporation. Any discrepancy will trigger a follow-up letter.

Part II — Organizational Structure

Select your organizational type (corporation, trust, LLC, etc.). Most nonprofits select "Corporation" and attach their articles of incorporation and bylaws.

Part III — Required Provisions

Confirm that your organizing documents (articles) contain the required:

• Purpose clause limiting activities to 501(c)(3) purposes
• Dissolution clause directing assets to another exempt organization
• No private inurement provision

If your articles are missing any of these, amend them before filing. The IRS will not approve your application without all three.

Part IV — Narrative Description of Activities

This is the most important part of your application. The IRS wants to understand exactly what your organization does, how it operates, and how each activity furthers your exempt purpose.

For each activity, describe:

1. What the activity is — Be specific. Not "education programs" but "free after-school tutoring in math and reading for students in grades 3-8"
2. Who benefits — The specific population, community, or cause served
3. Where it takes place — Geographic area, facility type, online/in-person
4. When and how often — Schedule, frequency, duration
5. Who conducts it — Staff, volunteers, contractors, partners
6. What percentage of time and resources it represents relative to all activities
7. How it furthers your exempt purpose — Connect the activity back to your 501(c)(3) purpose

Narrative writing tips:

• Write in plain English — avoid jargon
• Be thorough but concise — 2-4 pages is typical for a small nonprofit
• Describe actual or planned activities, not aspirations
• Quantify where possible (number of people served, frequency of programs, geographic reach)
• Address how you'll measure impact

Common mistakes in Part IV:

• Too vague: "We help people in our community"
• Too aspirational: "We will transform education nationwide"
• Missing the connection: Describing activities without explaining how they serve a 501(c)(3) purpose

Part V — Compensation and Financial Arrangements

Disclose compensation for all officers, directors, trustees, and the five highest-compensated employees (if any). The IRS looks for:

• Reasonable compensation — comparable to similar roles at similar organizations
• No private benefit — compensation must be for actual services rendered
• Conflict of interest policy — you must have one and describe it
• Independent board review — compensation should be approved by disinterested board members

If you're a founder who plans to receive compensation, this is fine — but document that the board approved it based on comparable data.

Part VI — Members and Other Individuals

Describe your governance structure: who has voting rights, how directors are elected, what classes of membership exist (if any).

Part VII — History

If your organization has been operating prior to filing, describe what you've done so far — activities conducted, funds received, and how those funds were used.

Part VIII — Specific Activities

Answer questions about specific activities that receive extra IRS scrutiny:

• Political campaign intervention (prohibited)
• Lobbying activity (limited — describe how you'll stay within limits)
• Fundraising activities (describe methods)
• Gaming/gambling activities
• Joint ventures with for-profit entities
• Grants to individuals or foreign organizations

Answer honestly. The IRS already has access to your state filings, website, and social media. Inconsistencies raise red flags.

Part IX — Financial Data

Provide revenue and expense projections for your current year and the next two years (or actual figures if you've been operating).

Revenue categories:

• Gifts, grants, and contributions
• Program service revenue
• Investment income
• Fundraising event income
• Other revenue

Expense categories:

• Compensation and benefits
• Professional fees
• Occupancy costs
• Printing and publications
• Travel
• Program expenses
• Administrative expenses

Tips for financial projections:

• Be realistic — the IRS is skeptical of overly optimistic projections
• Show that a substantial portion of your support comes from the public (required for public charity status)
• Include notes explaining unusual items or large variances year-over-year
• Make sure expenses don't exceed revenue without a good explanation

Part X — Public Charity Status

Select which public charity classification you're claiming. Most new nonprofits choose one of:

Classification	Section	Best For
Publicly supported — gifts and grants	509(a)(1) / 170(b)(1)(A)(vi)	Organizations funded primarily by donations and grants
Publicly supported — gross receipts	509(a)(2)	Organizations with significant program revenue
Supporting organization	509(a)(3)	Organizations that support other public charities

Most small nonprofits choose 509(a)(1). This means you expect to receive at least one-third of your support from the general public, government, or a combination.

Part XI — User Fee

Pay the $600 filing fee via Pay.gov.

What Happens After Filing

Timeline

Form	Expected Wait	If IRS Has Questions
1023-EZ	2-4 weeks	Rare — most approved without follow-up
1023 (Full)	3-6 months	Common — respond within 28 days

IRS Follow-Up Questions

If the IRS needs more information about your full Form 1023, they'll send a letter (typically within 60-90 days of filing). Common topics:

• More detail about specific activities
• Clarification on financial projections
• Questions about compensation arrangements
• Missing or incomplete attachments
• Purpose clause or dissolution clause language

Respond within the deadline (usually 28 days). Late responses can result in your application being closed without action — and you'll need to refile and pay again.

Your Determination Letter

When approved, you'll receive a determination letter. This letter:

• Confirms your 501(c)(3) status
• Specifies your public charity classification
• States your advance ruling period (if applicable)
• Is retroactive to your date of incorporation (if filed within 27 months)

Keep this letter forever. Donors, funders, banks, and state agencies will request it.

Common Reasons for Rejection or Delay

1. Missing IRS language in articles — Purpose clause or dissolution clause doesn't reference Section 501(c)(3)
2. Vague narrative — Part IV doesn't adequately describe activities or connect them to exempt purpose
3. Private benefit concerns — Compensation arrangements that appear excessive or governance that lacks independence
4. Incomplete financial data — Missing projections or unexplained variances
5. Prohibited activities — Political campaign intervention, private benefit to insiders
6. Late response to follow-up — Missing the 28-day response window

After Approval: Next Steps

1. Apply for state tax exemptions (separate from federal — see your state guide)
2. Register for charitable solicitation (41 states require it)
3. Set up fund accounting to track restricted funds and generate Form 990 reports
4. Mark your Form 990 deadline on the calendar — missing 3 consecutive years means automatic revocation
5. Begin accepting tax-deductible donations

Use our Form 1023 Preparation Checklist to make sure you have everything before filing. For the complete startup process, see How to Start a 501(c)(3).

Ready to set up your new nonprofit? Schedule Your Free Setup | Start Free — Under $100K in Donations

---

Related:

• How to Start a 501(c)(3): Step-by-Step Guide
• Form 1023 Preparation Checklist
• How Much Does It Cost to Start a Nonprofit?
• Form 990 for New Nonprofits