Form 1023: Proceed with Caution

This Filing Is a Potential Trap for the Unwary

Filing Form 1023 is usually a private foundation’s first introduction to the Internal Revenue Service because it is through this application that a private foundation requests recognition of its qualification as a tax-exempt organization. This form is also significant for a fledgling foundation because it will be subject to IRS scrutiny and, once completed and submitted, the foundation’s Form 1023 will be available as a matter of public record. Because Form 1023 is so important, it is imperative that it be completed accurately and carefully—a task that even seasoned advisors often choose to leave to private foundation specialists, such as the professionals of Foundation Source who have filed more than 1,600 successful 1023 applications.

One of the reasons Form 1023 is so difficult to complete is its sheer length: seventeen pages, including ten parts of the main form and approximately 40 pages of instructions. The IRS estimates  that taxpayers will need dozens of hours to do the record-keeping, learn about, prepare, assemble, and submit just the first eleven parts of the form. While the IRS’s time estimate might not be completely reliable, the Service clearly anticipates that Form 1023 requires substantial effort to properly prepare. Plus, the IRS now requires the Form 1023 to be submitted through its pay.gov site and the form itself is not at all user friendly.

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