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Comprehensive Guide to Completing IRS Form 1023

This comprehensive guide provides step-by-step instructions and essential information to successfully prepare an IRS Form 1023 application for recognition of exemption under 501(c)(3). Learn about nonprofit requirements, programs, funding sources, accounting, and more. Presented by Leonard Steinberg, EA, NTPI Fellow.

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Comprehensive Guide to Completing IRS Form 1023

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  1. Preparing IRS Form 1023Application for Recognition of Exemption – 501(c)(3) Presented By: Leonard Steinberg, EA, NTPI Fellow Steinberg Enterprises, LLC

  2. Topics for Discussion • Nonprofit Application Requirements • Programs • Funding Sources • Accounting • Review of Parts I through XI of the Application • Checklist

  3. Nonprofit Application Requirements • Proof of Incorporation or other Status • Tax-ID Number – Copy of IRS Letter • Name and Address of the Organization • Article of Incorporation or Formation • Bylaws of Operations • Conflict of Interest Statement • 2 Year Budget • Profit and Loss for the Current/Proposed Year

  4. Nonprofit Application Requirements • Balance Sheet • Compensation to Management • Names and Social Security Numbers of All Board Members • Mission Statement (Statement of Purpose) • Media Samples • Interviewing Executive Director and/or Board Members

  5. Programs • What Programs and Services does the Organization Provide? • Types of Programs • Management and General • Fundraising

  6. Types of Programs and Services • Program Types • Charitable • Religious • Educational • Scientific • Free • Fee for Service • Day Care, After School, Camps, Medicaid

  7. Types of Programs and Services • Unrelated Business Income • No relationship or purpose with any of the programs, e.g. Operating a Parking Lot • Prepare the 990-T, Taxable Income • Management and General • Day-today Operations • Fundraising • Events • Beware of Gambling Activities

  8. Types of Programs and Services • Nothing Related to Taking a Political Position or advocating for a particular candidate • Can be General Politics • Voting Rights • Candidate Forums • Issue Forums

  9. Funding Sources • Unrestricted Funds • General Donations – used for any purpose • Fundraising Events • Temporarily Restricted Funds • Restricted by the Donor • Time Restricted • Program Restricted • Time and Program Restricted • Permanently Restricted Funds • Endowments

  10. Funding Sources • Fees for Services • Fundraising Events • Golf Outing, Annual Dinner • General Solicitations • Federal Grants – May be subject to A-133 Audit • State and Local Government Grants • Partnerships with Other Organizations

  11. Accounting • Setting up the Books • Cash or Accrual • Balance Sheet • Income Statement • Record Income and Expenses by Program and Funding Source • Grants Management • Donor Restrictions

  12. 1023 - Application • Part I, Page 1 - Identification of Applicant • Make sure you have your signed POA 2848 • Part II, Page 2 – Organizational Structure • Part III, Page 2 – Required Provisions • Part IV, Page 2 – Narrative Description • Very Important, Succinct • Part V, Pages 2 through 5 – Compensation Issues • Use the Organization’s Mailing Address • Beware of Personal Inurement

  13. 1023 - Application • Part VI, Page 5 – Member Benefits • Part VII, Page 5 – Organization’s History • Part VIII, Pages 5 through 8 – Specific Activities • Part IX, Pages 9-10 Financial Data • Can attach Spreadsheets • Part X, Pages 10 through 11 – Public Charity Status • Part XI, Page 11 – User Fee and Signature

  14. 1023 - Application • Schedules A through H – Organization Specific • Schedule A – Churches • Schedule B – Schools, Colleges, and Universities • Schedule C – Hospitals • Schedule D – Supporting Organizations • Schedule E – Organization Not Filing Within 27 Months of Formation • Schedule F – Homes for Elderly, Handicapped, and Low-Income Housing • Schedule G – Successors to Other Organizations • Schedule H - Scholarships, Fellowships, Educational Grants

  15. 1023 - Checklist • Retain a copy for Your Records and for the Client • Add all available Media, Brochures, Flyers, etc. as part of the packet. Adds to credibility of the organization • Review the application with the Executive Director and the Board of Directors • Request for Expedited Review – Additional Cost • Engagement Letter, Signed 2848, and Retainer Fee • May be Subject to Annual Audit • Annual Filing of IRS Form 990, 990-EZ, 990-PF, 990-N • State Filing Requirements

  16. 1023 - Checklist • www.irs.gov – Charities and Nonprofits • IRS Exempt Organization Helpline – 1-877-829-5500 • www.Guidestar.org – Posting of annual 990 reports • Websites • Loss of Exemption for Not Filing • OPM

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