1023-EZ Update and Where Charities Stand

1023-EZ, charity, tax

For those keeping up with the 1023-EZ saga, a report on its results to date was released. I opened the IRS’ First Year Report with a small sense of skepticism. Ok…a biggish sense of skepticism. Which grew the more I read. After all, you’re telling me the universe splitting changes you made to an age-old process had little to no negative impact? Ooook.


Where the 1023-EZ is Today


The report is not super duper long. If you’re interested in the findings here are a few highlights:

  • A pretty transparent focus on customer service ratings. A rise from 44% to 77% to be precise. Which let’s be honest, ain’t bad.
    • Keep in mind, the threshold for, and oversight over, applying was lowered significantly. So of course, people are happy. But I appreciate the enthusiasm.
  • Compliance checks used to manage potential risks.
    • How many of these compliance checks? Exactly 3% of the total 1023-EZ applications filed. That would be 3% of 43, 157 of the applications it received in a year. But of that 3% over 30% were “ineligible” to use the 1023-EZ form.
  • A post-determination program wasn’t put in place in 2015, but will in 2016. Consisting of audits of organizations receiving 1023-EZ determination letters.
  • The IRS approved 95% of the total 1023-EZ applications received, but when using the “pre-check” process that number dropped to 77%. With most rejections resulting from an ineligibility to use the 1023-EZ form.
  • The types of organizations using the 1023-EZ process the most are Youth Development Programs, Christian, Animal Protection, Human Services Organizations and Parent Teacher Groups.
    • Not terribly surprised to see Youth Development, Animal Protection, and Parent-Teacher organizations. These tend to be local and incredibly small. With a reach that stays pretty local to. But, I was a little surprised where Human Service Organizations came in. 
  • Out of 43K total applications, none were denied. But 1949 were rejected.

 

But Wait, There’s More


This article was posted shortly after the report’s release. Where the Taxpayer Advocate Service not only disagreed with the way applications were being handled but pointed out that more work was being created by the IRS by increasing audits by ninefold.

And with that…the saga continues.

 

 

 

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