Is Your Nonprofit Really Ready to File the Form 1023? A 5 Minute Checklist.
Filing Form 1023 with the IRS isn’t just paperwork – it’s the one-shot, non-refundable last step to get your nonprofit’s 501(c)(3) tax exempt status. This approval opens doors for fundraising, grants, and legitimacy. But don’t rush into it blindly.
Too many nonprofits jump in before they’re ready and end up stuck in long delays, rejections, or worse, wasting time and money on a doomed exemption application.
Before you start clicking submit, take five minutes to run through this Form 1023 checklist. It’ll tell you if you’re genuinely ready or if you need to fix some stuff first.
I have many articles on this site going into nuts and bolts of what you see here – this list is for a quick reference – so follow the links to the relevant sections for more in depth information.
Do You Have a Real Charitable Purpose? Don’t Fake It.
You’d think this is obvious, but you’d be surprised how many organizations struggle to clearly say what they do and why it matters. The IRS isn’t interested in your side hustle or a fancy business dressed up as a charity. You need a real, IRS aligned charitable purpose, like education, religion, relief of the poor, or similar recognized categories. Your mission statement should be simple, clear, and focused.
Ask yourself:
- Can you explain your mission in one sentence using IRS approved terms?
- Do your planned activities actually support that mission?
- Are you serving a broader public and not just a few people (like family or friends)?
If you sound vague or your mission seems self serving, the IRS will flag it, and that can tank your application before it even starts.
Is Your Nonprofit Legally Formed with the Right Language?
It’s not enough to just file the Articles of Incorporation in your state. You have to make sure those articles contain the required provisions for 501(c)(3) status.
That means:
- A clear purpose clause stating your organization is organized exclusively for charitable purposes.
- A dissolution clause that says if your nonprofit ever shuts down, its assets must go to another 501(c)(3) nonprofit not some random person or business.
Most state templates won’t have this language built-in, so you need to amend your articles if they’re missing these key points.
Got Bylaws? Don’t Skip Them.
Bylaws are your nonprofit’s internal rule book, how it governs itself, how decisions get made, and how board members are elected or removed.
You must send your nonprofit bylaws to the IRS with your Form 1023, having them ready is crucial. They prove your organization is serious and follows good governance.
Your bylaws should cover:
- Procedures for electing and removing directors.
- How often and under what conditions meetings happen (quorums, voting rules, etc.).
- Conflict of interest policies (more on that below).
If you’re still “working on” your bylaws, hold off on filing. The IRS will want to know you have this stuff nailed down.
Board of Directors: At Least Three Unrelated People
The IRS expects a minimum of three unrelated directors on your board of directors. Why? Because a board full of family or business associates raises red flags for insider control and self dealing.
Even if your state allows a single director, that won’t cut it for 501(c)(3) exemption purposes.
Make sure your board is independent enough to provide real oversight. The IRS wants to see checks and balances, not a one man show wearing multiple hats.
Conflict of Interest Policy – Written, Signed, and Enforced
This is a must have. The IRS expects a written conflict of interest policy that:
- Requires disclosure of any financial or personal interests board members might have.
- Forces conflicted board members to recuse themselves from voting on related matters.
- Is signed by every board member every year, proving you take it seriously.
Don’t have a conflict of interest policy? You’re basically telling the IRS your board might be self dealing or running things for personal gain.
Know How You’ll Fund Your Mission
The IRS wants to know you have a realistic plan to keep your nonprofit afloat. Are you counting on public donations? Grants? Program service revenue? Fundraising?
There are many rules on how you can raise funds for a nonprofit, I highly suggest your read the articles under the fundraising directory page to familiarize yourself with what you can and cannot do.
Whatever the mix, you need a basic fundraising plan or budget projections. Vague guesses won’t cut it.
If you project to receive over $100,000 per year, be ready for the IRS to scrutinize your financials closely.
Financial Forecast – Don’t Wing It
If your nonprofit is brand new, the IRS requires a three-year projected budget with your application.
That means:
- Income broken down by source (donations, grants, fees, etc.).
- Expense categories spelled out (program costs, admin, fundraising).
- Realistic numbers, not just “$50K for programs.”
If you’re already operational, the IRS might ask for actual income and expense reports. No bookkeeping system? Set one up before filing.
Paying Anyone? Be Honest and Reasonable
If you’re planning to pay officers, staff, or board members, the IRS expects to see how compensation is determined.
Compensation must be:
Reasonable for the role and location and of course approved by people who don’t have a conflict of interest (i.e., not decided by the paid person themselves).
That means that if your founder is also the executive director and treasurer and they’re paid – expect extra IRS scrutiny. Be ready to explain how salaries are set and approved.
Program Descriptions That Don’t Suck
When describing what your nonprofit does, don’t just say, “We help people.”
Say something like:
“We operate a weekly meal delivery service for 75-100 home-bound seniors in Springfield.”
The of course be specific: numbers, schedules, locations, and logistics. This shows you’ve thought through the program, and it’s not just a vague idea. Don’t forget the percentage of time and resources allocated to each of your programs. If you miss the percentage, I promise you that you will get a letter from the IRS.
Ready to Pay the $600 Filing Fee?
No way around it. The current fee for filing Form 1023 is $600, paid upfront online at Pay.gov.
If you think you can dodge the fee by filing Form 1023-EZ, make absolutely sure you qualify for that shortcut. Most honest or serious nonprofits don’t.
And once you pay, there’s no refund, so double check everything before you file.
Final Word: Don’t Rush It. Get It Right. There’s no prize for being the first nonprofit to file Form 1023. What matters is getting it right the first time.
If you rush and your application is sloppy, expect delays, denials, and wasted resources. The IRS isn’t forgiving when it comes to mistakes or missing info.
If you checked off every item on this list, congratulations, you’re probably ready to file. If not, pause and fix what’s missing. Your nonprofit’s future depends on it.
________________________________________
Need a second pair of eyes before you file? That’s where I come in. You get one shot at this. Don’t waste it.
NOTE: If you’d like to receive the following organizing documents:- Nonprofit Articles of Incorporation,
- Nonprofit Bylaws,
- Nonprofit Conflict of Interest Policy,
- Conflict of Interest Policy Acknowledgment,
- Form 1023 Attachment with all the answers,
- Form 1023 Expedite Letter template,
- and Donor Contribution Form
in Microsoft Word Document format, please consider making a donation and you’ll get to download them immediately. Not only they're worth well over $1000 in value, they will save you weeks of copy pasting and formatting as they are ready to go templates which only need changing names and addresses.
